July 17, 2013
Once again it’s Ben Bernanke, Chairman of the Federal Reserve, to the rescue. With stock investors hanging on every word he utters, the markets are on edge, but moving higher. It is not just what he says, but how he says it that could drive stock traders to drink [and they do – a lot! I know, I saw that as a teenage messenger (my first job) on the hectic New York Stock Exchange trading floor].
We are going into reports of the second quarter earnings season now, and these reports could affirm a better economy or raise some fears of a slowdown. In addition, there is very little catalyst for the S&P 500 to break above 1700. Unless again Chairman Bernanke speaks about more and longer QE3 Fed easy money actions.
As long-term investors, we don’t worry about these short-term issues, we just watch and smile.
July 10, 2013
Stock markets are rebounding from a short-term 6% correction started 3 weeks ago when concerns about the Fed’s future actions to remove QE3 buying of U.S. bonds led to some selling. Friday’s jobs report offered the stimulus for more equity risk-taking.
The bond markets, however, are still feeling the effects of anticipated higher interest rates due to less Fed buying of bonds. Therefore, the risk rewards formula for bonds calls for removing the risks since the rewards are getting worse, so we believe it is better to avoid longer term bonds for now.