Taper!! . . . more forward guidance

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Not much time today . . . initial market reaction to headline, and subhead:

Screen Shot 2013-12-18 at 2.47.07 PM

That’s the sweet talk I was asking for a couple days ago.


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7 Responses to “Taper!! . . . more forward guidance”

  1. Gravatar of jknarr jknarr
    18. December 2013 at 12:11

    …and breakeven yields are down. Go figure.

    OPEN POST FED
    TEN YEAR NOMINAL 2.839 2.8748
    TEN YEAR TIPS 0.6233 0.6755
    BREAKEVEN 2.2157 2.1993

  2. Gravatar of ssumner ssumner
    18. December 2013 at 12:35

    jknarr, The power of expectations. The very thing that many people claim don’t matter, because no one believes the Fed.

  3. Gravatar of Dustin Dustin
    18. December 2013 at 12:43

    But but but I thought taper was causing stock market bubble?!! Hopefully that convo doesn’t need to be had again…

  4. Gravatar of Dustin Dustin
    18. December 2013 at 12:45

    But but but They said QE was causing stock price bubble??! Hopefully that convo doesn’t need to be had again…

  5. Gravatar of Dustin Dustin
    18. December 2013 at 12:46

    Sorry for double post, tried recall the submission to correct a very obvious typo.

  6. Gravatar of John Hall John Hall
    18. December 2013 at 13:10

    @ssumner, I’m not sure I understand your comment. People don’t trust the Fed on keeping rates low or the taper? Breakeven yields fell, but equities rally. It seems like it is a conflicting story.

  7. Gravatar of ssumner ssumner
    18. December 2013 at 13:27

    John, Last time I checked 10 year rates were little changed. My new “battle” post discusses all the cross currents. Here’s my take:

    1. Policy became more expansionary due to forward guidance. That’s a strong bullish factor for stocks.

    2. For bonds the forward guidance pushes rates lower but the taper talk and the Fisher effect push rates higher. As of now rates have swung up and down but little changed. Generally stocks are better for reading monetary announcements in a depressed economy. In a booming economy rates may be better. Today was expansionary, that’s clear.

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