The prospect of interest rates remaining low for longer has become clearer in the first 100 days of Janet Yellen’s leadership at the Federal Reserve. At the same time the threat of new asset bubbles forming may have become more pronounced. These are views expressed by faculty at the Wharton Business School. While tapering of
March 9th marked the five year anniversary of the current bull market. Memory of the previous bear market is a distant recollection to some. 2013 saw the S&P 500 jump 32 percent and the Nasdaq jump 40 percent while corporate earnings barely increased. U.S. equity indices recently hit record highs. This week we examine reasons
Just as one cold wave follows another this winter, waves of market volatility have become the norm in 2014. Do the waves of volatility forecast a change in the investment climate, or is it just a naturally recurring market rhythm? Based on our readings, seasonal volatility does not appear to be a precursor of a
Markets have been choppy since the page turned to another year. Uncertainty about the withdrawal of economic stimulus by the Federal Reserve, the pace of economic growth, and the potential for contagion spreading from emerging markets have been leading causes. This week we examine these issues as they relate to one another. We believe reasons
In a much anticipated statement, the Federal Reserve on December 18 announced a change in monetary policy—that it will begin to taper its large scale asset purchase program. The statement was coupled with additional guidance that interest rates will stay low for a considerable period. The statement’s impact is more a tweak than a decisive
The Federal Reserve met last week and it made no changes to its large scale asset purchase program. The late spring/early summer experience, where its communications about tapering the program were bungled, drove up interest rates, in expectation that stimulus would be withdrawn in the near future. As markets reacted, the Fed backtracked, and since
The way Congress goes about its business is maddening, counter-productive, and basically, a drag on the economy. This week we examine the partial government shutdown and its ramifications.
As St. Augustine spoke of the need for restraint, so also the Fed has spoken of its need to begin restraining its large scale asset purchase program. Though the initial bond-buying program may have helped stimulate demand in 2010 and 2011, keeping it going is now doing very little to stimulate economic growth and employment. In its announcement September 18 the Fed showed that it was as reluctant as the great Saint to implement restraint by tapering the size of its asset purchases; its message was “not yet”. Critics of the Fed believe the Fed’s unconventional program creates economic imbalances, stokes inflation, and provides markets a short-term, unsustainable “sugar high”. The unconventional program will continue, at least for a while. Markets were positively surprised by the announcement.
Is the Fed’s policy of quantitative easing effective? This question is particularly relevant as the Federal Reserve meets September 17-18 to discuss tapering of its large scale asset purchase program. That conversation has caused markets to convulse this summer.
Labor Day is behind us and fall—usually a volatile period-- is before us. The last weeks of August showed signs of optimism for the economy and as well as a rise in tensions in the Middle East.