Fed Implements QE3, Ben Bernanke “Gets To Work”: Is The “Romney Rally” Over?
The Federal Reserve Bank has ended the debate over QE3. It’s here. Ben Bernanke has given the markets what they wanted. The Fed will be buying up to $40 billion in bonds each month. This is good news for equities and it will keep interest rates low. Bonds will not be a good investment over the next few weeks as the Fed has generated more interest in equities. The Fed wants more risk-taking. Although people have said that quantitative easing doesn’t work, the market has been up since each new QE program has been implemented risk aversion is on the decline. Some long time market ‘pros’ even claimed an announcement from the Fed today wouldn’t move markets and were completely wrong in their view which shows a low level of predictive power – they claimed the Fed had run out of ammunition but these same market ‘watchers’ have been wrong for 3 easing programs and a ‘twist’.
We noticed no murmuring from Fed surrogates that usually pop up when the FOMC seeks to add a bit of confusion to market psychology which was bullish in our view. The Fed will accommodate well after the economy has turned around and after several months of jawboning from the left and right- Ben Bernanke and the FOMC finally decided to “get to work as Schumer suggested.”
Mitt Romney stated he would fire Ben Bernanke and we wrote: In a rare move that could backfire for the Republican presidential nominee, Mitt Romney stated he would not give Ben Bernanke a second term. While we won’t argue whether Ben Bernanke may deserve a second term, Romney may want to keep the economy as his main focus and not the Fed Chairman whose term will expire in January 2014. Romney’s comments could cause Ben Bernanke to, in an ‘apolitical’ way, – decide to move forward on QE3 because he’s got nothing to lose.
The stock market may continue to rise through the election and what was once dubbed a “Romney rally” might soon be attributed to President Obama if the former governor isn’t able to change the tide in the polls. We remain bullish and are continuing to look at our benchmark sectors for leads on market direction. Watch the financials, small caps and tech. Our estimate for the TLT 20 year bond fund remains the same (see our next target here). The Dow was up 206 points to 13,539.86 a gain of 1.55 percent.