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Posts tagged Fed

#Fed Begins #Taper

Count this as the tweet of the day, because at 2 PM today, this is all that was then talked about. Today the Federal reserve decided to cut their Quantitative Easing (QE) to $75 billion a month from the previous $85 billion. This will start coming in January. The equity market turned much higher based on this move.

The most important thing about the Fed announcement is that the federal funds rate will stay low 0%-.25% “well after” the unemployment rate goes to 6.5%. Based upon projections this means that it will continue into 2016. What this means for you as an investor is that all of your borrowing rates will continue to stay low. So all those trying to borrow to buy houses, all those trying to get student loans, all those borrowing/financing cars, etc will keep those low interest rates.

Sources: WSJ, CNBC, MarketWatch

Weekly Investment Advice

This coming week will ideally perform much better than last week. What will be a real market mover is the talk of the winding down of the Fed’s bond buying. e expect that this week will see upside, as we believe that there is no tapering coming this month, or even next month for that matter. Still holding our monthly end target of 1820-1825, as well as this week’s end of 1810 for the S&P. These are approximately a 2.4% and 1.8%  gain from Friday’s close. We are expecting a weekly end of 16050-16100 for the DOW as well. These are aggressive numbers, however

For those not familiar will this program, it is refered to as “quantitative easing” which is that the Federal Reserve has been pumping free money into the market. The federal reserve has been buying government issued bonds at a rate of $85 billion a month. This is with the hopes that this stimulus helps to boost the US economy. So far this has seemed to been working., however the potential long term consequences of this program could have consequences, so at some point it needs to be lowered or pulled competely. People think that pulling back this program, or at least lowering the amount per month, will have a very big effect on the economy and global domestic product (GDP) growth, in the short term. However the Fed, has also talked about that they will keep this program going until key economic indicators are hit; unemployment rate, inflation rate, GDP growth. The main one is based upon jobs data, which is the unemployment rate hitting a low point, looking towards 6.5%

November Monthly Market Performance

Overall for the month of November, the equity market had a very solid return. NASDAQ had the best return at 3.58% over the the month, the DJI had just shy of a 3.5% return (but included an all-time high of 16166.94), and the S&P lagged at 2.8%. As we tail off to the end of the year, we are still seeing very good gains month over month. Year to date S&P has seen returns of 26.62% where the midcaps have seen a stellar return of 34.56%. Currently we re predicting a year end close of 1,820-1,825 for the S&P representing a 0.82-1.1% return through December.

Institutional investors are being very timid around what the Fed is going to do moving forward. There is talk of taper in the month of December, but we feel that the current economic conditions to not meet the point at which the Fed will start to taper. A lot of people seem to think that as the economy improves the Fed will completely remove their stimulus of bond buying. We are still a long way from where the economy will need to be, so even if we see improvemnt, they will simply pull back on the total amount of monthly bond buying. We feel as that this pullback will not be a major factor in the total return over december or the following months.

Through the month of November, the leading sector was Healthcare with a return of 3.94%. The lagging sector was Utilities with a return of -1.62%.

Gainers and Losers

Gainers 🙂

MSFT – Microsoft Corporation (+7.7%) with issuing a $0.28 dividend, ex 11/19, due for payment 12/12. This stock is still being eyed by many investors, due to the declining PC market. However this company has and is taking steps to strongly improve its mobile development.

JCP – J.C. Penny Company Inc (35.87%) JCP has been extremely volatile over the year. Even though this stock was up, it still could be seen as speculation due to concerns over it’s future.

PCLN – Priceline.com Inc (13.14%) Priceline came dangerously close to closing at  1200, but came up shy, still managed to reach an all-time high of 1192.33.

Losers 🙁

TSLA – Tesla Motors Inc (-20.42%) Tesla has been quite a volatile stock as of late. People have been struggling with valuation of this company and if it is worth the current price that people are paying for it.

FTNT – Fortinet Inc (-15.05%) due to an announcement of a CFO transition, after a short period of time in office.

GLD – SPDR Gold ETF (-5.51%) When it comes to commodities gold has been seriously lagging. Who knows when we will see a bottom to this commodity.