FED/stocks/What’s next?
With the key FOMC meeting over, key b/c it was their last official comment before QE ends at month end, what do we now have to look forward to in terms of their exit? IF the economy continues to show signs of improvement, the next move won’t be an actual policy change, it will be wording, the telegraph by Fed members in speeches topped off by the April FOMC statement that will tell us that rates won’t be “exceptionally low” anymore for an “extended period.” That’s step 1. While the FOMC won’t be raising the fed funds rate anytime soon, paying a higher rate of interest on reserves will come first (also not anytime soon) and this will lift all rates, step 2. Step 3 much later will be a fed funds hike. IF on the other hand the economy doesn’t gain further traction, rates will stay at current levels. Under both scenarios (less friendly Fed or lack of economic growth), I believe the stock market rally is approaching its end.
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March 16th, 2010 at 4:02 pm
Peter, I’d love to agree with you. While we are seeing some improvement, can it really keep up with expectations?
Given that XLF is now up 22 out of 25 times (88% in over a month), at a time of increased uncertainty (FASB, Economic Relapse, Geopolitical tensions, Ending MBS purchases, Ending Tax credit) … can more and more pundits collectively scratch their heads and wonder if there isn’t something nefarious going on here (gov’t manipulation)?
Maybe this is the push that pushes the bears into capititulation? I’m a bear, and I just feel helpless and beat at this point. It seems absolutely nothing can turn this market. Bad Home Index, no problemo. Bad Housing/building stats, no problemo. Local gov’ts slashing spending and firing, no problemo. Massive pension gaps, no problemo. Low volume, no problemo
And it’s not only the price action. The advance/decline is quite healthy, the internals of the rally are healthy.
Sincerely,
A Capitulated, and A$$whooped Bear
March 16th, 2010 at 4:02 pm
Peter, I’d love to agree with you. While we are seeing some improvement, can it really keep up with expectations?
Given that XLF is now up 22 out of 25 times (88% in over a month), at a time of increased uncertainty (FASB, Economic Relapse, Geopolitical tensions, Ending MBS purchases, Ending Tax credit) … can more and more pundits collectively scratch their heads and wonder if there isn’t something nefarious going on here (gov’t manipulation)?
Maybe this is the push that pushes the bears into capititulation? I’m a bear, and I just feel helpless and beat at this point. It seems absolutely nothing can turn this market. Bad Home Index, no problemo. Bad Housing/building stats, no problemo. Local gov’ts slashing spending and firing, no problemo. Massive pension gaps, no problemo. Low volume, no problemo
And it’s not only the price action. The advance/decline is quite healthy, the internals of the rally are healthy.
Sincerely,
A Capitulated, and A$$whooped Bear
March 16th, 2010 at 6:45 pm
Perhaps stocks have to approach the degree of overvaluation seen at the peak of the dot-com boom … we’re some distance from that, I think.
And given the boost provided by ZIRP, the equity overvaluation could even go higher … (now THERE’s a scary thought!)
What’s AAPL with a PE of 100?