D-day has arrived and the market is, well, not collapsing. It might still fall apart today, but for now, it is taking a bit of a breather from all the uphill running it has done recently. Ben Bernanke and crew have yet to announce a thing, but the tenor and tone of the “talk” about Wall St. town regarding this issue has certainly changed.
- While U.S. government bond yields and mortgage rates have shot higher in anticipation of less Fed support, the central bank will still be expanding its balance sheet for many more months as it tries to wean the economy and financial markets from its ever-expanding stimulus.
How mellow is that? A simple statement of reality without all of the negative hoopla to go with it. And, then there is this.
- Asian markets kept their nerve on Wednesday counting on the Federal Reserve to launch only a modest scaling back of stimulus later in the day, though all assets were vulnerable to any hint of hawkishness.
Less mellow and but a hint of negativity and, might I say, unfortunately, a hint of reality. The market might go crazy if the Fed announces some crazy plan to stop all the injections immediately or to increase the size of its planned curtailment more than the $10 billion already predicted.
The fact is the market has considered the facts of this case and its verdict is in – guilty. The Fed will begin to taper and it will eventually stop the program all together.
- With the U.S. economy now on a somewhat steady, if tepid, recovery path and unemployment falling, policymakers have said the time was drawing near to begin ratcheting back their bond buying with an eye toward ending the program around mid-2014.
In fact, eventually, it will also release the downward pressure on interest rates so they can rise to normal levels, and then the market can deal with that end-of-the-world scenario. In the meantime, the economic data will continue to fill in the gaps between reality and irrational fear.
- FedEx Corp posted a better-than-expected quarterly profit on cost cuts. The company, considered an economic bellwether because of the massive volume of goods it moves around the world, also backed its profit view for the year, sending its shares up 3 percent in premarket trading.
Goods are moving through the Fed Ex system, which suggests the folks are buying and sellers are shipping.
Okay, so this is pretty much a blah day, until the Fed speaks its piece this afternoon, anyway. So, let me suggest we all sit tight to see what happens. Go with the general tenor of the media today – QE tapering is a forgone conclusion and the market has accepted that. Then again, maybe you prefer something a bit more sensational …
- Volume was quiet ahead of the potential FOMC storm that awaits us today.
Take that, you rosy-view optimist. I am speaking to myself here.
Trade in the day; Invest in your life …
