Archive for month: January, 2014

As we approach the jobs report later in the week, we need to be mindful that the greatest risk from an economic data standpoint isn’t of weakness, but instead inordinate strength, which could then sow the seeds of the market doubting “ZIRP.”  It wouldn’t mean that stocks would sell off immediately, but as we look out over the coming weeks and months, the risk of the market losing confidence in ZIRP is the biggest threat to the stock market, and the better the economy gets, the higher the chances. Luckily, though, we have a bit of a leading indicator for what might happen if and when the market does begin to lose confidence in the Fed’s ZIRP.  The UK is somewhat of a “blueprint” for what we can expect here in the US, now that the Fed has started tapering QE and is relying more on “Forward Guidance” as a policy tool.  The UK shifted its policies away from QE to “Forward Guidance” over the past year, and that has resulted in higher stock prices as the economy improves, higher bond yields and a stronger Pound (sound familiar?). Read More