As the US economy continues to strengthen, the Fed will begin to scale back (taper) their massive $85 Billion monthly bond buying program. This causes yields/interest rates to creep up, specifically the 10 year, making bonds more attractive then stocks. My question is, maybe somewhat of a contrarian thought, as unemployment heads south and GDP growth increases, wouldn't all of this make US equities more attractive in the near and mid term?
CEO's look to the macroeconomic climate and base their continuing and new projects off of this information. With the world economy on the rise, this bolsters confidence among CEO's and leads them to expand their operations/hire more. So isn't that bullish for stocks because of potential expansion/growth of business?
Has this roughly 26% YTD increase in the US equity market been caused solely by QE? Where does revenue and EPS growth play into all of this. Fundamentals/technicals should and will always be the basis of whether we buy and sell. Massive liquidity inflows have made the institutional and retail investor rather sanguine. Do we remember how capital markets worked before QE? Will reduction of the Fed balance sheet cause a massive, drawn out correction for stocks? You can never predict the top, nor can you ever predict the bottom. Things to ponder at night..
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