Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Coronavirus China Infection Statistics Analysis, Probability Forecasts 1/2 Million Infected - 21st Feb 20
Is Crude Oil Firmly on the Upswing Now? - 20th Feb 20
What Can Stop the Stocks Bull – Or At Least, Make It Pause? - 20th Feb 20
Trump and Economic News That Drive Gold, Not Just Coronavirus - 20th Feb 20
Coronavirus COVID19 UK Infection Prevention, Boosting Immune Systems, Birmingham, Sheffield - 20th Feb 20
Silver’s Valuable Insights Into the Upcoming PMs Rally - 20th Feb 20
Coronavirus Coming Storm Act Now to Protect Yourselves and Family to Survive COVID-19 Pandemic - 19th Feb 20
Future Silver Prices Will Shock People, and They’ll Kick Themselves for Not Buying Under $20… - 19th Feb 20
What Alexis Kennedy Learned from Launching Cultist Simulator - 19th Feb 20
Stock Market Potential Short-term top - 18th Feb 20
Coronavirus Fourth Turning - No One Gets Out Of Here Alive! - 18th Feb 20
The Stocks Hit Worst From the Coronavirus - 18th Feb 20
Tips on Pest Control: How to Prevent Pests and Rodents - 18th Feb 20
Buying a Custom Built Gaming PC From Overclockers.co.uk - 1. Delivery and Unboxing - 17th Feb 20
BAIDU (BIDU) Illustrates Why You Should NOT Invest in Chinese Stocks - 17th Feb 20
Financial Markets News Report: February 17, 2020 - February 21, 2020 - 17th Feb 20
NVIDIA (NVDA) GPU King For AI Mega-trend Tech Stocks Investing 2020 - 17th Feb 20
Stock Market Bubble - No One Gets Out Of Here Alive! - 17th Feb 20
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20
The Growing Weaponization of Space - 14th Feb 20
Will the 2020s Be Good or Bad for the Gold Market? - 14th Feb 20
Predictive Modeling Suggests Gold Price Will Break Above $1650 Within 15~30 Days - 14th Feb 20
UK Coronavirus COVID-19 Infections and Deaths Trend Forecast 2020 - 14th Feb 20
Coronavirus, Powell and Gold - 14th Feb 20
How the Corona Virus is Affecting Global Stock Markets - 14th Feb 20
British Pound GBP Trend and Elliott Wave Analysis - 13th Feb 20
Owning and Driving a Land Rover Discovery Sport in 2020 - 2 YEAR Review - 13th Feb 20
Shipping Rates Plunge, Commodities and Stocks May Follow - 13th Feb 20
Powell says Fed will aggressively use QE to fight next recession - 13th Feb 20
PALLADIUM - THIS Is What a Run on the Bank for Precious Metals Looks Like… - 13th Feb 20
Bitcoin: "Is it too late to get in?" Get Answers Now - 13th Feb 20
China Coronavirus Infections Soar by 1/3rd to 60,000, Deaths Jump to 1,367 - 13th Feb 20
Crude Oil Price Action – Like a Coiled Spring Already? - 13th Feb 20
China Under Reporting Coronavirus COVID-19 Infections, Africa and South America Hidden Outbreaks - 12th Feb 20
Will USD X Decline About to Trigger Precious Metals Rally - 12th Feb 20
Copper Market is a Coiled Spring - 12th Feb 20
Dow Theory Stock Market Warning from the Utilities Index - 12th Feb 20
How to Get Virgin Media Engineers to FIX Hub 3.0 Problems and NOT BS Customers - 12th Feb 20
China Under Reporting Coronavirus COVID-19 Infections by 66% Due to Capacity Constraints - 12th Feb 20
Is Coronavirus the Black Swan That Takes Gold To-Da-Moon? - 12th Feb 20
Stock Market 2020 – A Close Look At What To Expect - 12th Feb 20
IBM AI Mega-trend Tech Stocks Investing 2020 - 11th Feb 20
The US Dollar’s Subtle Message for Gold - 11th Feb 20
What All To Do Before Opening A Bank Account For Your Business - 11th Feb 20
How and When to Enter Day Trades & Swing Trade For Maximum Gains - 11th Feb 20
The Great Stock Market Dichotomy - 11th Feb 20
Stock Market Sector Rotation Should Peak Within 60+ Days – Part II - 11th Feb 20
CoronaVirus Pandemic Stocks Bear Market Risk 2020? - Video - 11th Feb 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Forget About The Fed Dialing Back QE3 – U.S. Buy Bonds!

Interest-Rates / US Bonds Apr 06, 2013 - 12:42 PM GMT

By: Sy_Harding

Interest-Rates

The economic recovery has been progressing so well that it had become almost a sure thing the Fed will begin phasing out its easy money policy and QE stimulus programs much earlier than planned, possibly beginning as early as this summer.

Even the Fed seems to be preparing markets for that probability with its recent statements, and speeches by individual Fed governors.


Forget about it!

There were already enough nails in the recovery’s tires to run it off the road without Friday’s report that only 88,000 jobs were created in March. As I said in last week’s column, the economy and stock market were already at their most critical point since the peak in 2007.

Previous reports included that new home sales unexpectedly fell 4.6% in February, the biggest monthly decline in two years. Pending home sales declined 0.4%. Basic durable goods orders (ex-volatile aircraft orders) declined 2.7% in February. The Conference Board’s Consumer Confidence Index fell sharply in March. The ISM Mfg Index dropped sharply from 54.2 in February to 51.3 in March. The ISM Non-Mfg Index (service sector) plunged from 57.2 in February to 53.3 in March.

FedEx and Caterpillar, bellwethers for global economic strength, both warned of significantly slowing global sales, Caterpillar reporting its Asia-Pacific sales plunged 26%, and North American sales fell 12% from December through February.

And now Friday’s employment report shows only 88,000 jobs were created in March, horribly worse than the consensus forecast for 200,000 jobs being created.

Don’t panic. This is not something we haven’t seen before. The economic recovery has stumbled in each of the last three summers, raising fears of a slide back into recession. And each time the Fed came to the rescue with another round of QE type bond-buying stimulus.

But we do have to wonder what the Fed can do about it this time.

In each of the last three years when the recovery stumbled the Fed’s previous QE stimulus programs had expired, and it simply introduced a new program (QE2, ‘Operation Twist’, and QE3) each time, and the economy recovered.

But this time the economy is slowing even though the Fed’s QE3 did not expire. In fact in December the Fed introduced QE4 or ‘QE to infinity’ as some call it, raising its monthly asset-buying (bonds and real-estate-backed securities) from $40 billion to $85 billion and made it open-ended, with no expiration date, promising to keep it going until there are clear signs that the economy has recovered and can make it on its own.

So what can the Fed do this time? It is a worry.

One thing it can’t do is think about reversing its current stimulus programs any time soon as it had hoped.

The bond market has begun to realize that. Bonds have been in a fairly significant correction since last summer, on expectation that the recovering economy would allow the Fed to begin removing the stimulus punch bowl and raising interest rates. The iShares 20-year bond etf TLT declined 13% from its peak last summer to its low last month. 

But, with the awful economic reports of late Fed tightening any time soon is not in the cards, and bonds are realizing that, recovering their appeal as a safe haven.

Even before the ugly jobs report our technical indicators had already triggered a new intermediate-term buy signal on bonds from oversold levels.

The next question will be whether the stock market will have similar concerns about the economy. It was pretty much able to ignore the string of previous negative economic reports, with the Dow and S&P 500 closing at new record highs on Tuesday. But will the jobs report be the final straw?

Sy Harding is president of Asset Management Research Corp., and editor of the free market blog Street Smart Post.

© 2013 Copyright Sy Harding- All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Sy Harding Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules