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David J. Klein, financial consultant, RBC Wealth Management, Vernon Hills.
What moved markets last week?
"There were several things that really occurred. First, of course, the Federal Reserve, as most people know, lowered the Fed Funds rate and the discount rate by 25 basis points. The cut did spur on the market for a number of reasons. But, very frankly, the cut certainly was an indication the economy remains somewhat weak. They (the Fed) did point out the markets remain under considerable stress. But there also is the feeling that this is the last of the interest rate cuts."
What did the Fed tell us about the current economy?
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"The markets have been showing us the way, so to speak. The news we listen to on a daily basis is all about what is going on today. But the stock market is more about the future. And the stock market, truthfully, is looking better and the market is continuing to recover."
Are we in a recession?
"Remember, this past week the gross domestic product numbers came out and showed in the first quarter the economy came out a better than expected 0.6 percent. That's still showing slow growth but it was a better number than had been anticipated."
We had major mergers last week, including Mars and Wrigley. Are mergers picking up?
"When merger activity picks up it is a sign of an economy that is awakening. Remember, corporate profitability has been very good. What you see is money in motion and money in motion accompanies an economy in recovery."
How are oil prices doing?
"Oil came down this past week. There is a report that the Turks are bombing the Iraqi Kurds #8230; As of Friday morning, it is up again and that shows how it moves when there are violent situations."
How is the U.S. dollar doing?
"There is a feeling among many economists that the dollar may be bottoming. If, indeed, we do see a bottoming of the dollar, we might see more stabilization going forward. If the Fed has finally stopped lowering interest rates, you could have a boost for the dollar. Simultaneously, you could see a drop in oil prices. That could be a major inflation protection."
What may move markets this week?
"The economic calendar moving forward is relatively light. We'll see the trade deficit at the end of the week. We'll see numbers on consumer credit during the week, but I think what will move markets is the psychology of the Fed action and the expectation of many economists thinking the second half of the year is going to be stronger than the first half of the year."