Federal Reserve Chairman Ben Bernanke’s congressional testimony this week created some shockwaves throughout global markets. He hinted that the aggressive quantitative easing campaign which began during the financial collapse could begin to taper off. Not immediately mind you, but there’s a light that’s brightening at the end of the QE tunnel. It was this sentiment which triggered market corrections around the globe. Our US market held up better than others.
For decades we have relied on analyst Tom Gallagher to keep us current on Washington politics as they influence investments. His independent political insight foresees the Fed to begin tapering its quantitative easing operations during the 2nd half of the year. Economic data will have to continue to improve for them to do so, and it is definitely headed in that direction. He doesn’t think reduced easing will derail the Bull Market by any stretch. However, he does view the tapering off as potentially disruptive near-term as stocks and bonds price-in the changes.
Bernanke will probably start early and small, to get the ball rolling. He is methodical in his approach and is very focused on risks. Since Bernanke’s TERM EXPIRES in January, he will most likely begin the process earlier rather than later, possibly at the September Federal Reserve meeting. Unwinding this 5-year monetary stimulus program is tricky but it’s time to move on. Its job is done.
We are prepared for more shockwaves during this evolutionary process of recovery. The Bull Market is still strong. Summers tend to be choppy. But we feel good about the prospects for the rest of 2013 and have positioned portfolios accordingly.
Relax during Memorial Day Weekend!
God Bless America and God Bless our Troops.
By: Mike Frazier
