Financial Market Weekly Recap and Outlook

By Jeff Friedman

Last week volatility was the name of the game as we saw commodities back down, while the stock market and U.S. dollar gained ground. While there is considerable uncertainty about whether underlying economic fundamentals can support continued stock market gains later this year, traders currently are focusing on the positive aspects of relatively lower crude oil prices and a favorable US dollar that is attracting foreign money to our shores.

There are clear signs that the U.S. economy is slowing. Consumer spending is sluggish now that income tax rebate checks have been spent, credit is still tight, and jobs are less secure. There is also the prospect that export growth will slow due to a weakening in growth abroad, and the rebound in the U.S. dollar. The good news is that headline inflation should be coming down a bit due to a recent drop in crude oil prices. Still, energy costs (including gasoline) remain elevated, and companies are still trying to pass along costs. Core inflation may not ease as quickly as headline inflation, but overall, I see the economy at a turning point for slowing growth and somewhat easing inflation. Read rest of article