Friends
If you thought yesterday was one for the ages, today was even more amazing. Volatile is not a strong enough term for what happened today. We began the day with a not unexpected snap back rally of over 200 Dow points. As the day progressed, we waited for the Fed announcement which came at about 20 minutes after 1:00 p.m. our time. Stocks gave up much of their gains going into the announcement being up about 85 Dow points at the time of the release. Stocks immediately went up 100 more points within seconds of the announcement and then once the release was analyzed, stocks fell from up 185 Dow points to down 200 Dow points in a matter of minutes. Then within minutes, stocks rallied back to even. From there, the volatility only increased with the ticker moving ten and twenty points at a time. Up 50 points, down 150 points, back to up 135 points at 2:25. Have I made you nauseous yet? Up 225 points at 2:45. By 2:50 we were up 318 points. By the close, the Dow Jones Industrial Average was up a whopping 430 points.
Bond trading was even more amazing. Treasuries moved in a violent manner with rates dropping immediately from the time of the Fed announcement. The 10-year Treasury note dropped to 2.03%. The 3-year note dropped to .30%. By the end of the day, the 10-year note was back around 2.25%. Unreal volatility for bonds.
What did the Fed say that got everyone so fired up? Well basically for the first time ever, the Federal Reserve indicated that short-term rates will remain at zero for the next two years. Gold exploded and the Swiss Franc exponentially exploded. Essentially, the 2-year note became a 30-day bill as rates are sure to stay at zero for the next two years. Finally, later in the day Gold cooled off but was still up nicely.
Once this emotion subsides, stocks that pay dividends are going to be awfully attractive, especially companies that can maneuver a slow growth environment. Dr. Bernanke just said to U. S. savers and investors today that you can expect 0% on your money for a very long time. Welcome to risk assets if you want your money to grow.
I have no idea what to expect tomorrow, but we’ll let you know when it happens.
Have a nice evening everyone.
