Innovest's September 2009 Market Commentary
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The month of September marked the one-year anniversary of the Lehman Brothers bankruptcy, which resulted in the collapse of global capital markets. In contrast, September of this year offered the good news of improving economic data and several merger and acquisition deals. Walt Disney Co. announced the purchase of Marvel Entertainment for $4 billion, and
The Federal Reserve Board extended its program to buy mortgage-backed securities through March 2010, after having purchased nearly $850 billion thus far. The Fed continues to keep short-term rates low with no expected rate hikes until sometime in 2010 (or possibly later). With a significantly expanded balance sheet, the Fed may be setting the stage for an inflationary environment if they fail to effectively and timely execute an exit strategy. However, for now, inflationary expectations remain muted as velocity of money is low, the economy has ample slack and upward wage pressures remain non-existent. Lastly, the Institute for Supply Management’s manufacturing gauge remained above 50 for the month of September, indicating economic expansion. Recent growth in inventories has come from pent-up demand and corporations having cut inventories sharply to manage costs.
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