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Federal Reserve issues Beige Book Stocks Rise

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It is expected to be one of the brightest summaries of the economy that the Federal Reserve has issued since the recession began. A commonly used name for the Fed report called the Summary of Commentary on Current Economic Conditions by Federal Reserve District. It is published just before the FOMC meeting on interest rates and is used to inform the members on changes in the economy since the last meeting (Investopedia, 2014). It is one of the reports that have the most impact on investors as very few organizations can move the market up or down like the Fed can.
The report was issued just shortly before this press release. There was an immediate rise in stocks while gold and silver went sharply down. The report shows that moderate growth has occurred in all the districts measured and that a positive economic outlook is viewed by most financial, economic, and other important advisors. There was additional data that showed that the retail industry had a very good Christmas compared to others in the recession years. Continuous upward mobility in economic indicators give hope that the recession may have actually reached a real recovery that will eventually reach the working man and stir even more hiring.
Most economic data and interviews with members of banks and other important governmental and economic gurus has suggested that the market while still volatile will continue to grow based on a positive economic outlook and continuous data that shows moderate growth. It has been a long time since the mainstream media along with economist and the Federal Reserve has been able to say positively that they continue to experience “moderate growth”. These two words moderate growth are so stunning to hear without any hesitation to believe that better times lie ahead in the coming year. It has been almost seven years since we have heard those who have much knowledge in economics and the economy such as the Fed has provided a positive report without any negative side remarks.
The dollar has also seen gains against the euro and the yen as we seem to have reached the point of economic stability for the first time in seven years. More positive reports from the government regarding economic data for the year 2013 should be continuing to come in the next two weeks including the consumer price index report. How will this affect stocks? It depends on what stock that you own. Some stocks move based on supply and demand. While good economic news usually has a positive effect on all stocks and does make some feed that a rise in interest rates may take place when the Fed meets in a couple of weeks.
There is still widespread fear that our enormous debt will bury us one day as we fail to keep up with the entitlement payouts thru pension plans and social security benefits to the baby boom generation as it continues to grow older and people continue to live a lot longer than ever before. However, they still fail to see that many people are investing their money for retirement and that in the end we will always find a way to avoid becoming Greece or Spain. The Federal Reserve has continued to influx the economy and their reports do show that the need to create stimulus to sustain the economic recovery may be a thing of the past. We are not saying they are going to raise interest rates soon. The fact that they could without destroying the economy and have more faith in the economic outlook should cause more consumer confidence along with causing even more records to be broken in Wall Street.
In the New Year ahead, there will be continued real economic recovery in both the United States and Europe. The inflation level in the United States is extremely low due to a continued shift to dependence on domestic energy supplies and interest rates still at low levels due to the continued need to influx the United States Economy. The possibility of interest rates being raised slightly this year is possible while bond rates are still so low that most economist are advising in purchasing European bonds rather than United States bonds. The interest rate or yield on bonds is still at about 40% of pre-recession levels in both the United States and Europe. The unemployment rate is expected to fall as a brighter economic outlook also does provide for a better job market. The manufacturing industry saw a moderate growth rate that was better than expected. The restaurant industry continues to struggle as disposable income and consumer confidence should show signs of strengthening as Americans will loosen up their belts when unemployment rates continue to fall throughout the year. The banks are also being strengthened by the Fed as they try to encourage stability of financial institutions by requiring banks to keep at least 6% of their capital on their balance sheets.



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