Since Fed Chairman Ben Bernanke first brought up the notion of tapering there has been hysteria over the inevitable tightening of interest rates. Some people confused tapering for tightening and some insist it is the same thing.
Even after five years of the Fed’s most aggressive accommodative policy in history, there is still a lack of hoped for quality credit creation in the economy, which could be a sign that the greatest deleveraging of the U.S. economy since the Great Depression is still not complete. The Fed’s unrelenting dovish policy appears to support this concern.
Provided the economy performs as well as Federal Reserve policymakers expect, the Fed will phase out large-scale asset purchases within the next 10 months. That’s a big “if” of course. The Fed has been projecting a stronger recovery each of the last four years, only to see growth average around a tepid 2%.
Politically, 2013 was the year of snatching defeat from the jaws of victory. First the GOP followed the direction of Junior Senator Ted Cruz (R Tex.) down a dark alley in a fight they were guaranteed to lose, and, then with the GOP on the ropes, the President and his team botched the roll-out of the Affordable Care Act website. In the markets all eyes were on Federal Reserve mainly because Congress abdicated all responsibility for moving the economy forward to Ben Bernanke, who finally signaled the beginning of the end of QE3.
Most of us in the West know, or should know, that all things being equal it is best for the Federal Reserve not to intervene in the economy. We prefer market forces to work. But of course all things are not equal.
Hump day is providing investors with a major speed bump before the market opens. The E-Mini contract is trading down to as low as 1772.25, almost 30-handles lower than the overnight high set just hours ago.
The petroleum market is trying to assess the impact from emerging issues in emerging markets and rising U.S. oil production ahead of Ben Bernanke's last Fed meeting and ahead of the President's State of the Union address.