Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
Well speaking to the comments just posted a few hours ago we just got a story from Fed mouthpiece Jon Hilsenrath at the WSJ, indicating we can expect a very dovish press conference from Bernanke next week. The market rocketed up on the news and all is well in the world again as QE infinity still is boundless apparently. Even after all this volatility we just went from red to green for the month of June on the S&P 500. Thankfully there is no longer a need to know anything about earnings, revenue, margins et al – you just have to know what Ben is going to do or say.
At the same time, however, the Fed is talking about pulling back on its $85 billion-per-month bond-buying program. The chatter about pulling back the bond program has pushed up a wide range of interest rates and appears to have investors second-guessing the Fed’s broader commitment to keeping rates low.
This is exactly what the Fed doesn’t want. Officials see bond buying as added fuel they are providing to a limp economy. Once the economy is strong enough to live without the added fuel, they still expect to keep rates low to ensure the economy keeps moving forward.
It’s a point Chairman Ben Bernanke has sought to emphasize before. The Fed, he said in his March press conference and again at testimony to Congress last month, expects a “considerable” amount of time to pass between ending the bond-buying program and raising short-term rates.
He seems likely to press that point at his press conference next week, given that the markets are telling him they don’t believe it.
Disclosure Notice
Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog
