Keep connected
Our investment management team is made up of engaged thought leaders. Get their latest commentary and stay informed of their frequent media interviews, all delivered to your inbox.
Over the past few months Fed Chairman Ben Bernanke and his colleagues implied they’d like to reduce the central bank’s purchases of bonds but said that this ‘tapering’ would always be ‘data dependent.’ Since economic numbers had been getting better, almost all market players assumed some schedule to wind down these purchases coming from the Fed’s Open Market Committee 2-day meeting September 17-18th. Those bets were cancelled when Bernanke & Co. shocked the markets by maintaining the status quo. Stocks immediately reversed course, heading higher on this renewed stimulus while gold prices had the biggest move, going from an intra-day loss of US$10 per ounce to a gain of over US$50. Looking back, perhaps it shouldn’t have come as a surprise. Interest-sensitive stock as well as bond prices had moved sharply lower from May to late August in anticipation of this tapering. The 10-year Treasury yield had almost doubled to 3%, while the S&P Homebuilding Index had slid by a third. But the Fed had not wanted to see rates rise to a level where they would impact economic activity. Bernanke, a student of the Depression, would rather be three months too late than one month too early. (more…)