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Posts tagged QE

#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%