Fed Chairman Ben Bernanke is scheduled to speak today at the Kansas City Fed's annual Jackson Hole conference in Wyoming. Will he outline a new plan for monetary stimulus? If so, will the second wave of quantitative easing (QE2) be bold--bold enough to work? Or maybe he'll just offer the same chit-chat that we've been hearing for months by telling us that the recovery is slowing and that nominal rates will stay low for an extended period.
What's clear is that the crowd is anxious. The fear is that the economy is headed for a double-dip recession. But the market is also confused about what's coming, and what the current Fed policy means. Consider two stories in today's Wall Street Journal. The Ahead of the Tape column opined:
A glance at the stock market lately suggests the prospect of more so-called quantitative easing, or QE, isn't doing much to inspire a rally. If anything, the more the Fed acknowledges the weakening economy, the worse the market responds.
Really? Has the stock market fallen because the crowd doesn't expect QE2 (assuming it's even tried) will work? Or is the selling related to disappointment that a new, bolder round of QE has yet to arrive?
Elsewhere in today's Journal we're advised:
The market is bracing for the possibility of QE2. Market expectations of more quantitative easing, alongside weak economic data, have led U.S. bond yields to fall sharply.
Maybe Ben can clear it all up and set the market straight. Stay tuned.