The Fed released the results of their two day summit Wednesday and the markets appear to be disappointed with the way the economy is turning. The stunning rally of the past week was greeted by a quick selloff that gradually rebounded to end the day “sharply unchanged.”
The fact that the markets rebounded from the quick selloff may be a positive sign in the long run, because the same news two weeks ago would have probably caused a 2% break.
At the heart of the report was the Federal Reserve estimate that the recent slowdown in growth and hiring has probably not going to have a great deal of change in the next quarter.
The bankers said that they foresaw the new growth being down more than 15% from the same meeting in April when they predicted that GDP would be up from a low of 2.4% to the high end of 2.9%. They did add that the estimates for 2013 were also not as favorable as they thought three months ago.
The current policy of “twisting” in which the Fed buys longer term securities and sells shorter term to replace them will remain in place. Chairman Ben Bernanke said that the Central Bank is “prepared to do what is necessary” to support growth in the US economy. He further stated that in order to foster that growth that the Fed would be buying more than $267 billion of long term debt.
So after weeks of speculation we have the answer… sort of.
The Fed will continue to support the markets. Does this mean that all of the uncertainty is now removed from the market and we can resume the bull from last fall and the first quarter this year?
That is very difficult to say. We might have a move to the upside, but we may also break. You will need to have the tools to react to anything that the market will bring.
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As Always,
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