July 18, 2013 at 9:06 am
So after the last Fed meeting, we saw markets plunge on the ‘threat’ of tapering (a response to the economy’s slow improvement). Yesterday, Bernanke says essentially the same thing, but not much of a reaction from the markets.
What do you think? Were people really panicked the first time that the rally cannot survive without artificial support? Or was it more due to fancy algos and computerized trading systems that reacted? Did traders come to their senses yesterday?
July 18, 2013 at 9:38 am
I think part of the reason that we didn’t see any big swings in the major indices yesterday was that Bernanke didn’t say anything definitive. He basically expressed that, “Hey, we might keep purchasing assets, we might not.” In a previous appearance before Congress back in May, the Fed Chairman seemed to give the impression that they would decide to begin tapering in the near future according to a specific set of economic parameters that they believed were achievable.
Then, over the next few months, we got several disappointing employment numbers, reports of slower growth forecasts in China over the previous quarter, and most recently some earnings forecasts that hinted at a slowing U.S. economy. I believe investors feel as though, with all these factors, that it is highly unlikely that the Fed will begin tapering soon.
Bernanke’s reassurance that if “employment were to become relatively less favorable, if inflation did not appear to be moving back toward 2 percent, or if financial conditions… were judged to be insufficiently accommodative… the current pace of purchases could be maintained longer,” helped support the markets yesterday.
July 18, 2013 at 11:39 am
Perhaps we spoke too soon…S&P making new highs. Then again, that’s not really a novelty anymore, is it?
July 18, 2013 at 2:40 pm
The DOW as well…and it appears that Bernanke’s Senate testimony today was mostly a reiteration of yesterday’s testimony. So, I’m not sure why the market is rallying, but it’s better than the alternative….right?
July 21, 2013 at 3:29 pm
Somehow the fed is running amok. Everytime Bernanke gives a talk, he says absolutely nothing, yet the markets always over-react. Then when they release the notes fo the actual FOMC meetings they attempt to clarify their position, only to again say next to nothing. It is time for total transparency. The Fed needs to simply release the mniinutes of the meetings immediately after they have a meeting and the Chairman needs to stop being political and simply state what and when he thinks he might implement something. So far this plan of his is a debacle and has failed miserably at controlling anything.
July 21, 2013 at 6:20 pm
Or big money is know what they want to do. Just waiting to collect money. waiting everybody get panic then big money comes back.
I just try to follow the trend.
You must be logged in to reply to this topic.