Thursday, June 20, 2013

Economic Journal - Thursday, 6/20/2013

(As of 7:28 am PST)
 
Anxiety reigns on Wall Street this morning.  Comments from Ben Bernanke, The Federal Reserve Bank Chair, sent markets reeling downward yesterday afternoon and the fallout has continued into this morning’s session, with most markets down over 1%.  The drop is happening in spite of some sparkling economic reports out of the US.  US home sales were up; the Leading Economic Indicators showed a small gain and the Philly Fed Index, a key measure of manufacturing activity soared to its highest level in months.  China manufacturing data was weak sparking concerns of a slowdown in that economy.  It is a definite risk off scenario, with investors flocking to the safety of US Treasuries and the US dollar is soaring on currency markets.  Expect markets to reverse today as fears of an early Fed exit from QE3 reverse, and solid economic reports prevail.  The strengthening dollar and fears of a withdrawal of stimulus has also caused gold, silver and oil to fall heavily in the commodities area.  Gold was down over $80 dollars per ounce before recovering a part of its losses.  All of this turmoil highlights the tremendous problem that the Federal Reserve faces as it attempts to wind down economic stimulus programs.  Even as the economy improves on Main Street, the steroid driven investment markets will face extreme volatility over the next few years when the Federal Reserve tries to normalize its monetary operations and exit from stimulus programs.

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