The recent rally in stocks has had many haters and new ones will be coming to the fore shortly. The ‘most hated’ rally in history moved up another leg today after Ben Bernanke’s speech yesterday clarified which way the Fed will be headed. The two most major initiatives of the FOMC are to monitor inflation and jobs growth. In short, inflation is low and jobs haven’t improved markedly in 4 years. We told our readers that an intermediate buying opportunity occurred right after the Fed’s last speech.
In our 3 most important highlights from the Fed’s May 1, statement we argued vehemently that an accommodative stance was necessary or bond yields could rise sharply. – see (The 3 Most Important Highlights From The FOMC Rate Decision May 1 2013) excerpt below
The Committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes. (from the FOMC statement) – our reaction. Here’s where we disagree with the Fed. A stronger statement would have gotten rid of the word reduce as the economic data continues to be week.
The Russell 2000 hit an all-time high today and signaled another leg in the current rally could continue. Gaps up could hurt individual performance but we are relatively constructive in the short and intermediate run as the TLT continues to tank. Notice the gap up today that could leave room for new buyers and holders to exit/enter.