FIANCIAL ECONOMICS ASSOCIATION Economy Update 3.9.15

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  • FIANCIAL ECONOMICS ASSOCIATION Economy Update 3.9.15
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  • FIANCIAL ECONOMICS ASSOCIATION FEA Market update Unemployment Inflation Policy rate Labor markets Financial markets Policy rate expectations Summary
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  • FIANCIAL ECONOMICS ASSOCIATION FEA 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.
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  • FIANCIAL ECONOMICS ASSOCIATION FEA 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 Reserves exceptionally low setting of 0.25 percent interest rates? One possibility is to cite the fact that inflation is running below target
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  • FIANCIAL ECONOMICS ASSOCIATION FEA 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
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  • FIANCIAL ECONOMICS ASSOCIATION FEA 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.
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  • FIANCIAL ECONOMICS ASSOCIATION FEA Inflation The FOMCs inflation target is 2 percent. Inflation was above target as of January 2012, but has been running below target in 2014 and 2015.
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  • FIANCIAL ECONOMICS ASSOCIATION FEA 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 FOMCs 2 percent target.
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  • FIANCIAL ECONOMICS ASSOCIATION FEA 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 FOMCs inflation target in coming months and quarters. However, this bears careful watching. Inflation and inflation expectations moving away from target is a concern
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  • FIANCIAL ECONOMICS ASSOCIATION FEA 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.
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  • FIANCIAL ECONOMICS ASSOCIATION FEA 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.
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  • FIANCIAL ECONOMICS ASSOCIATION FEA 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.
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  • FIANCIAL ECONOMICS ASSOCIATION FEA Alex Curriculum 1.Financial Economics a.quanitative finance, consulting, private equity 2.stats a.econometrics 3.Valuation finance a.energy valuations vs. standard book value valuations, technical analysis 4.macroeconomics
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  • FIANCIAL ECONOMICS ASSOCIATION FEA Dylan...potential areas of study IO Economics Transfer pricing b. analytics financial analytics/modeling
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  • FIANCIAL ECONOMICS ASSOCIATION FEA Basics of Trading Basic Trading Definitions Different Products Available Fundamental Trading Technical Trading Overview of stock charts Rules for Battle of the Bulls
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  • FIANCIAL ECONOMICS ASSOCIATION FEA Basic Trading Definitions Stock 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 companys outstanding shares Dividend Yield - Financial ratio of how much a company pays out in dividends compared to its stock price Open - Opening dollar amount of stock High/Low - High and low dollar amounts of the stock throughout the day of trading
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  • FIANCIAL ECONOMICS ASSOCIATION FEA 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.
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  • FIANCIAL ECONOMICS ASSOCIATION FEA 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 its 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.
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  • FIANCIAL ECONOMICS ASSOCIATION FEA 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.
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  • FIANCIAL ECONOMICS ASSOCIATION FEA
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  • FIANCIAL ECONOMICS ASSOCIATION FEA Battle of the Bulls Timeline: Team registration: April 8 th Battle begins: April 13 th Battle ends: April 27 th Awards and winners announced; April 30 th Rules: Teams of 2-4 Top 3 teams win cash prizes How to register: Please email educationfea@gmail.com with your team name, members, emails of members.educationfea@gmail.com Further instructions will be received through email correspondence.