Fed Meeting: Quantitative Easing On The Table, Bulls Run
The Federal Reserve has left its key interest rate at 0-0.25 percent, saying pretty much the same thing it said at the last meeting: the economy is in recovery mode; consumer spending, which is increasing gradually, is constrained by a lousy job market, rotten income growth and declining household wealth due to the weak real estate market; and business spending is slowing from its quick pace earlier this year.
Gosh, that doesn't sound too good, does it? Yet, the stock market is ticking up and that can only be for one reason: Uncle Ben is considering showering the economy with more money if need be. The central bank noted that it would "provide additional accommodation if needed to support the economic recovery to support the economic recovery".
Translation: if we have to turn on the money spigots, we will.
This is known in some circles as "quantitative easing," which is a fancy way of saying that the Fed would consider buying government or mortgage-backed bonds to keep interest rates low and potentially spur economic growth.
Investors took the statement to mean that reflation trade is on and therefore, the bulls are running. For most real people, this kind of day-to-day movement is nonsense, but for those of us who are steeped in this stuff, it's been fun watching the shorts cover all the way up from 10,000. As my father told me early in my trading career: don't get married to your positions, or else you could face a costly divorce!
Photo by Flickr User David Paul Ohmer, CC 2.0
