Friends
Like a baseball team one out away from a World Series win (Texas Ranger fans can relate), the bears had the Champagne chilled and ready to pop as the 1:00 CST hour FOMC statement approached. Yes, indeed, the Fed announced the beginning of the tapering process. A $10 billion dollar reduction in the $85 billion bond buying program was announced ($5 billion less Treasuries and $5 billion less MBS). The bears could see that 3rd strike coming right across the plate. But, perhaps because the Fed made sure that they emphasized that rates will remain very low for a very long time (seemingly moving the goal posts again), stocks rallied. That’s right. Instead of the collapse (strike three) that the bears had hoped for, the bulls charged into the fray and bid share prices up. Of course, because the majority of market participants were expecting the taper announcement to deflate stock prices, it seems just about right that prices would move the opposite direction.
By the close, the Dow Jones Industrial Average was up 292 points to finish the day at 16,167. The S&P 500 was up 29 points to close at 1810. Gold was down $10 to trade at $1219 per ounce, while oil was up $.36 to trade at $97.58 per barrel WTI.
It seems the Fed may have done a good job of conditioning the markets not to panic about the taper. For all the hand wringing, perhaps market participants were indeed ready for the taper to begin (some of us begging for the taper to begin). Now, today was just one day, and may have caught the bears short, so we’ll see if the bulls can build on this move and take stocks to new highs by year end. Predicting markets and investors reactions to market movements is a fools game. Just stay with your investment plan and don’t let wild movements cause you to take your eye off the ball. Markets can surprise to the upside like they did today, AND they can surprise to the downside.
