Upload
job-lee
View
215
Download
0
Tags:
Embed Size (px)
Citation preview
FIANCIAL ECONOMICS ASSOCIATION
Economy Update3.9.15
FIANCIAL ECONOMICS ASSOCIATIONFEA
Market update
UnemploymentInflationPolicy rateLabor marketsFinancial marketsPolicy rate expectationsSummary
FIANCIAL ECONOMICS ASSOCIATIONFEA
Economy approaches normal
• Labor markets showed steady improvement in 2014• Broader indexes of labor market performance have risen to their
long-run averages.• Lower longer-term interest rates and lower oil prices in recent
months should provide additional tailwinds for U.S. macroeconomic performance.
FIANCIAL ECONOMICS ASSOCIATIONFEA
Interest rates
• The policy rate remains near zero, where it has been since December 2008, nearly six years ago.
• Can current macro-economic data rationalize the Federal Reserve’s exceptionally low setting of 0.25 percent interest rates?• One possibility is to cite the fact that inflation is running below target
FIANCIAL ECONOMICS ASSOCIATIONFEA
Unemployment
• The unemployment rate has fallen much faster than the FOMC expected, and the fall has recently accelerated.
• Nonfarm payroll employment has also increased faster than anticipated.
• Unemployment and nonfarm payroll employment are the two workhorse indicators of U.S. labor market performance. • Though there are many other possible indicators
FIANCIAL ECONOMICS ASSOCIATIONFEA
Summary for labor markets
• In summary, labor markets continue to improve and are approaching or even exceeding normal performance levels.
• Normal labor markets have not been associated historically with a policy (interest) rate near zero.
• Over the course of 2015, it will become more and more difficult to point to labor market performance as a rationalze for a near-zero policy rate.
FIANCIAL ECONOMICS ASSOCIATIONFEA
Inflation
• The FOMC’s inflation target is 2 percent.• Inflation was above target as of January 2012, but has been running
below target in 2014 and 2015.
FIANCIAL ECONOMICS ASSOCIATIONFEA
Inflation remains low
• The inflation target of the FOMC is 2 percent.• Currently, inflation is running below this target.• Global factors, including low inflation in Europe and lower oil prices,
may be temporarily holding inflation down in the U.S.• Generally, inflation is expected to rise toward the FOMC’s 2 percent
target.
FIANCIAL ECONOMICS ASSOCIATIONFEA
Inflation expectations
• Inflation expectations are one of the most important determinants of actual inflation, according to modern macroeconomic theories
• Most likely, inflation will rise toward the FOMC’s inflation target in coming months and quarters.
• However, this bears careful watching. Inflation and inflation expectations moving away from target is a concern
FIANCIAL ECONOMICS ASSOCIATIONFEA
Recent volatility in financial markets• During the late summer and continuing into October, global financial markets
began to price in the possibility of a global recession based largely on news of a weaker-than-expected European economy.
• My own view has been that such fears were overstated, in part because U.S. macroeconomic fundamentals seem strong.
• However, if such a scenario did develop, the Fed would most certainly respond.• Since mid-October of 2014, this issue has faded as U.S. economic data has
indicated continuing growth.
FIANCIAL ECONOMICS ASSOCIATIONFEA
The current expected policy rate path
• Currently, markets expect the Federal Reserve to raise the policy rate gradually across 2015.
• This is in accordance with most current projections.
FIANCIAL ECONOMICS ASSOCIATIONFEA
Summary
• The FOMC has indicated that the policy rate is likely to rise this year, with the exact timing dependent on macroeconomic data in coming quarters.
• Analysts sometimes cite the current low level of inflation as a reason why the FOMC may wish to remain at the zero lower bound (ZLB) for even longer.
FIANCIAL ECONOMICS ASSOCIATIONFEA
Alex
Curriculum…1. Financial Economics
a. quanitative finance, consulting, private equity2. stats
a. econometrics 3. Valuation finance
a. energy valuations vs. standard book value valuations, technical analysis4. macroeconomics
FIANCIAL ECONOMICS ASSOCIATIONFEA
Dylan...potential areas of study● IO Economics● Transfer pricing ● b. analytics
○ financial analytics/modeling
FIANCIAL ECONOMICS ASSOCIATIONFEA
Basics of Trading
• Basic Trading Definitions
• Different Products Available
• Fundamental Trading
• Technical Trading
• Overview of stock charts
• Rules for Battle of the Bulls
FIANCIAL ECONOMICS ASSOCIATIONFEA
Basic Trading DefinitionsStock Ticker
- An abbreviation used to identify a stock that is being traded on a particular market
P/E Ratio
- Price to earnings ration, the smaller the better
Market Cap
- Total dollar market value of all of a company’s outstanding shares
Dividend Yield
- Financial ratio of how much a company pays out in dividends compared to it’s stock price
Open
- Opening dollar amount of stock
High/Low
- High and low dollar amounts of the stock throughout the day of trading
FIANCIAL ECONOMICS ASSOCIATIONFEA
Different products available
• Stock• A type of security that signifies ownership in a corporation and represents a claim on part of
the corporation's assets and earnings. There are two main types of stock: common and preferred.
• ETF• Exchange Traded Funds (ETFs) are funds that track indexes like the NASDAQ-100 Index, S&P
500, Dow Jones
• Mutual Funds• An investment program funded by shareholders that trades in diversified holdings and is
professionally managed.
• Options• an option is a contract which gives the buyer the right, but not the obligation, to buy or sell an
underlying asset or instrument at a specified strike price on or before a specified date.
FIANCIAL ECONOMICS ASSOCIATIONFEA
Fundamental Trading
What is fundamental trading:
Fundamental trading is a practice which takes into account the inherent value of a company in order to value it’s stock.
This is a widely used method of trading and is most common associated with Warren Buffet.
Fundamental traders are not interested in short term price changes but rather long term.
FIANCIAL ECONOMICS ASSOCIATIONFEA
Technical Trading
What is technical trading:
Technical trading is a practice that takes into account past market data and current market data in order to predict the future stock price.
Technical traders look primarily at different factors such as volume, price, moving averages, patterns and formations in order to make technical decisions of when to buy and sell financial products.
Technical traders are looking for short term benefits by riding out trends and patterns. They often do not look past one year increments of time.
FIANCIAL ECONOMICS ASSOCIATIONFEA
FIANCIAL ECONOMICS ASSOCIATIONFEA
Battle of the BullsTimeline:
Team registration: April 8th
Battle begins: April 13th
Battle ends: April 27th
Awards and winners announced; April 30th
Rules:
Teams of 2-4
Top 3 teams win cash prizes
How to register:
Please email [email protected] with your team name, members, emails of members.
Further instructions will be received through email correspondence.