When freshly installed Fed Chair Janet Yellen went before Congress yesterday, she mostly followed the script written by her predecessor, Ben Bernanke. But now that she's in charge, everything she says will carry a great deal of weight.
The Federal Reserve went forward with its taper plans yesterday, announcing it would reduce its bond-buying by $10 billion per month. But that is no guarantee the Fed will continue to taper, especially if the economy falters. And now that the Fed has a new chief in Janet Yellen,
Despite the big gains on Wall Street after the Fed announced it would start to taper its stimulus programs in January, the move takes away a big prop to stock prices. Well, most stock prices. Because as the era of cheap money goes away, something very interesting is going to happen with oil...
I didn't think it would happen, but Fed Chairman Ben Bernanke up and did "it" a few minutes ago.
He announced the "Fed taper" - the Fed will cut its bond buying by $10 billion a month (to $75 billion) beginning in January.
I think there are a few points to consider about Bernanke's move. I want talk briefly about those, and then highlight what this news of a Fed taper means for your money.
Good news is actually good news on Wall Street today.
Stocks rallied Friday following a robust November jobs report that showed U.S. employers continued to add jobs at a steady pace last month, which pulled the unemployment rate down to a five-year low at 7.0%.
Be careful out there.
The stock market rally that started in March 2009... The one that's taken us out of the Great Recession and to new highs... The rally that's driving sentiment indicators of people who benefit from rising financial assets directly, peripherally, or because they hope all boats rise with the market...
The rally has never been loved.
The thing is, equity markets don't need love to go twice as high from here, or three times as high in the next 20 years. If they get what else they need, they'll keep going higher.
We could be on the verge of a generational bull market. That's if deficit-plagued, interconnected global sovereigns deleverage and, at the same time, re-capitalize middle and rising classes by making "recourse-sound" capital available and simultaneously reconstituting entirely the notion of taxation.
Too bad the likelihood of that happening is somewhere between slim and none.
That's one reason why I'm an increasingly reluctant bull.
But there's another reason too.
Now that it looks like Janet Yellen will succeed Ben Bernanke as chief of the Federal Reserve, investors need to re-think how the Fed under her guidance will affect the markets.
Money Morning Capital Wave Strategist Shah Gilani surprises Stuart Varney of FOX Business' "Varney & Co." today (Wednesday) when he states he believes the U.S. is sitting on a stock bubble right now.
Find out why Gilani sees the markets as "well over-cooked" - creating a stock bubble - from the Fed's strategy in the following video segment:
Money Morning’s Chief Investment Strategist went on record with his prediction months ago, stating that there’s not a central banker in the world who has the guts to step away from QE. Few – if any – investors agreed. But they didn’t lock in a 100% gain, either…
Fed Chairman Ben Bernanke announced in a press conference this afternoon that the U.S. Federal Reserve will continue quantitative easing, the controversial bond buying program, for now. Chairman Bernanke expressed concern over rising borrowing costs and their effect on the economy, saying that the situation calls for continued quantitative easing.
Analysts on and off Wall Street were surprised, to put it mildly. Markets responded very well to news of continued easy-money policy. The mainstream consensus was that the Fed would begin to taper off its $85 billion monthly bond purchases by around $10 or $15 billion each month. Current pricing just didn't take continued bond buying into account, and the bullish reaction was immediate, intense, and widespread.
You know that members of the Fed have been hinting since June that the central bank wants to scale back on its $85 billion a month bond-buying program, the third round of what's known officially as quantitative easing.
It's been exactly one year since the Fed announced QE3 - also dubbed QE Infinity, with no clear idea of an end date given at the onset. The Dow Jones Industrial Average has climbed 14.9% in that time, and the S&P 500 is up 17.25%. Since the first round of this last series of quantitative easing started in December 2008, the indexes are up about 73% and 92%, respectively. The fear now is that if the Fed stops buying and rates begin to move higher in the months ahead, money will leave the market as quickly as it piled in and cause a prolonged selloff that drives down share prices.
Fed officials have been dropping broad hints that tapering is coming sooner rather than later.
It's bad enough when one storm cloud appears on the horizon to threaten the stock market - much less four all at once. But forewarned is forearmed. Here's what investors need to prepare for...
CNBC Worldhosted Money Morning Chief Investment Strategist Keith Fitz-Gerald this week to discuss the Fed's QE taper.
Printing gobs of money when the current slump is arguably caused by cash overabundance definitely doesn't seem like the rational thing to do.
Hints from the U.S. Federal Reserve this week that the quantitative easing taper is near ruffled feathers on Wall Street last week - but the idea of less Fed stimulus has caused much more turmoil in certain overseas markets. Here are the places getting hit the hardest.