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.And it has to do with deflation...
Keith Fitz-Gerald Nails It on Today's FOMC Meeting
Almost every major news outlet predicted a taper coming out of today's FOMC meeting, but Money Morning's Chief Investment Strategist Keith Fitz-Gerald went on the record months ago correctly predicting there would be no taper.
The major news outlets were wrong, and Fitz-Gerald nailed it...Read more...
How the Fed QE Taper Will Affect Foreign Markets
Hints from the U.S. Federal Reserve this week that the quantitative easing (QE) taper is near pushed the Dow down 105 points Wednesday - but the idea of less Fed stimulus has caused much more turmoil in certain overseas markets.
The problem: A corresponding hike in U.S. debt yields has fueled higher borrowing costs around the globe. This has led to the flight of cheap capital out of emerging currencies and markets.
That triggered the following reactions:
What You Need to Know About Silver Prices and the Fed QE Taper
Silver prices have rebounded about 28% since the lows of late June, and are currently trading at around $23 an ounce.
This move was key for silver prices - it means the metal broke out above its 50-day moving average.
Barclays' technical analysts pointed out that last week was silver's best week since 2011, with a gain of 14.3%.
Esther George on Why It's Time to Begin Adjusting QE
Kansas City Fed President Esther George hasn't changed her tune about the Fed's massive quantitative easing (QE) program, as she explained in an exclusive interview with FOX Business Network today (Tuesday).
"I think it is time to begin to adjust those purchases," she told FBN's Peter Barnes. "The labor market has shown now, for the last six months, pretty steady gains of close to 200,000 per month. That is a good indicator that there has been sustained improvement here and that I think it would be appropriate, given the size of our balance sheet, given the level of accommodation, that we begin to make adjustments that reflect that improvement as we go forward."
Launched last year, and dubbed QE Forever, the program is aimed at holding down long-term interest rates. It has fueled the recent housing rebound and record breaking stock-market rallies.
Your Best Strategy for Playing This QE Rally
Don't worry. The bubble "Quantitative Easing" has built is still intact. For now.
However, even though there's breathing room, don't think it's time to breathe easy. There will be Hell to pay, just not now.
And I have found three opportunities to take advantage of the next phase in this unsettling market.
But let's gather some perspective first.
The news that the Fed might taper QE bond purchases gave the bond (and stock) markets a fit of the vapors and caused gold to careen toward $1,200 an ounce.
Why the U.S. Dollar is Rising – And Why It's Still Doomed
Many have wondered - and rightly so - why the U.S. dollar is rising even though the U.S. Federal Reserve has done just about everything possible to debase the currency over the past five years.
Over the past two years, the U.S. Dollar index, which measures the dollar against a basket of major world currencies, is up by more than 12.6%.
Part of the answer is that most of the world's other central banks have pursued easy money policies similar to the Fed's. In the so-called "currency wars," the U.S. dollar has one major built-in advantage.
"The U.S. has never defaulted," explained Money Morning Chief Investment Strategist Keith Fitz-Gerald. "The world may hate our guts, but when all hell breaks loose, they all love our dollar."
Also helping to explain why the U.S. dollar is rising is that it remains the world's reserve currency - the money a majority of nations use to buy commodities such as oil -- and that the U.S. economy, for all its warts, is in better shape than most of the other developed economies in the world.
"The dollar the best-looking horse in the glue factory," Fitz-Gerald said.
So it wasn't too surprising that when the Fed recently hinted that it might start "tapering" its quantitative easing (bond-buying) policies later this year, the U.S. Dollar index spiked 3.1%.
But Fitz-Gerald said that investors still need to be wary of the stronger U.S. dollar going forward.
This Sept. 2 Event Could Send the U.S. Dollar Crashing
The Fed Or the Fundamentals? What's Behind Stock Market Moves?
What's driving the stock market - the Fed or company fundamentals?
The answer, of course, depends whom you ask.
Has most or all of the growth in the market over the past few years been due to the Fed's massive QE easy money stimulus?
Or is it fundamentals like earnings per share and the price/earnings ratio?
We asked three experts to weigh in: Money Morning Chief Investment Strategist Keith Fitz-Gerald, Money Morning Capital Wave Strategist Shah Gilani and Brian Wesbury, the chief economist at First Trust Advisors.
Here's their take.
What to Do Now as the End of QE Nears
If investors needed a reminder that global stock market rallies have been goosed by the Fed's lose monetary measures, they got it.
On Wednesday, U.S. equities went on roller-coaster ride.
The Dow Jones Industrial Average, up 155 points before FOMC Chairman Ben Bernanke said the Fed could soon begin to tap the brakes, ended the day down 80.41, or off by 0.5%,.
The uncertainty of when the Fed would begin to wind down its $85 billion-a-month in asset purchases sent investors to the sidelines in a hurry.
"This is a very sensitive market and particularity sensitive to any notion that tapering will come too soon," Quincy Krosby, market strategist at Prudential Financial in New York told Reuters.
"No one wants to be selling if the data reaches the point when the Fed begins to specifically talk about tapering. The market doesn't wait for the Fed to move. It will move before. That's how it operates," Krosby continued.
Of course, we knew QE couldn't really last forever. So what should investors do?..