Friends
After yesterday’s “no taper” party in financial assets, the stock and bond market looked like they were both suffering the effects of a hangover. As we mentioned yesterday, the Fed’s surprising decision not to begin tapering the monthly bond buying program sparked an impressive rally in stocks and bonds, but perhaps market participants have begun to consider the reasoning behind the Fed’s decision. Basically, the Fed’s non-action indicates that they still believe the economy is not ready to stand on its own two feet. The dilemma for investors continues to be – is this good or bad news? The economy is growing at a minimal pace, the Fed remains “all in” with regards to accommodation, and stocks, bonds and commodities rally. That is good for investors, but the fact that all this Fed accommodation hasn’t been able to provide the escape velocity that the economy needs is discouraging, not to mention causing unintended consequences. The low interest rates are bad for savers and high gasoline and food prices are bad for the middle class. Unintended consequences, indeed.
As for today’s trading, the Dow Jones Industrial Average was down 40 points to finish the day at 15,636. The S&P 500 was down 3 points to close at 1722. Gold traded right where it bounced to yesterday at $1365 per ounce, while oil was down $1.90 to trade at $106.17 per barrel WTI.
Let’s see if today’s pause was simply digesting yesterday’s gains, or will investors be re-evaluating the Fed’s interesting decision? We’ll let you know how the week wraps up tomorrow.
Have a nice evening everyone.
