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Fed to
maintain “high level of accommodation”…….In highly watched and analyzed
Congressional testimony today, Federal Reserve Chief Janet Yellen stated that a
high level of monetary accommodation remains necessary to support growth in the
economy and job creation. Yellen believes the economy remains far from
satisfactory and still needs considerable help.
What’s the point? The Fed is not
changing its tune relative to its current monetary policy, which remains highly
accommodative. The implications for financial assets, particularly stocks,
remains unchanged: the Fed’s ultra low
interest rate policy has been an important factor in supporting valuations of
financial assets (stocks and bonds) for the past several years. With returns on
bonds extremely low, quality dividend-paying stocks continue to remain
attractive and we expect there will be continued flow of capital from bonds to
quality dividend stocks, which we expect should support higher valuations for
quality dividend-paying stocks. Link: http://money.msn.com/business-news/article.aspx?feed=OBR&date=20140507&id=17596054
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Russia
sanctions a double-edged sword…….There is growing evidence that sanctions
put in place on Russia may be having unintended consequences of also crimping
other European economies. Germany today reported that factory orders unexpectedly
plunged in March led by a large decline in orders from European nations. Some
economists attribute this to concerns over the Ukraine situation.
What’s the point? Our expectation is
the Ukraine crisis will probably not inflate to a major geopolitical crisis. To
the extent the crisis continues to be a high-visibility issue or escalates
further, we expect this would continue to be a negative factor interjecting
volatility into the financial markets. That said, we note that there are always
geopolitical forces and event affecting the financial markets. Ultimately, we
believe positive financial and economic fundamentals, particularly in the U.S.,
should lend support for U.S. stocks. Link: http://money.msn.com/business-news/article.aspx?feed=AP&date=20140507&id=17594186
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