For two weeks now, the Treasury market and the US$ have been showing signs of fully pricing in what the Fed will announce on Nov 3rd following the sharp moves after Bernanke’s Aug 27th Jackson Hole speech (10 yr yield now at 5 1/2 week high). Now that the reality of their action is upon us in one week and the WSJ is likely leaking what they will ultimately announce, “a few hundred billion dollars over several months,” equity investors must be more careful here in the short term and I repeat that I believe stocks will consolidate the 2 month gains at our below current levels for another few weeks at least. With that said, the US election is of course a potential market mover but assuming no major changes, the outcome is also likely priced in. Looking into yr end, the only event that is not priced in, just because we don’t know yet the outcome, is what the official tax rates on income, cap gains and dividends will be for ’11 and ’12.

Category: MacroNotes

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