US Fed’s Yellen Boosts Stock Markets

Federal Reserve chief Janet Yellen signaled that rational exuberance is just fine.

That, at least, is how some of America’s largest money managers interpreted her comments on Wednesday suggesting interest rates will remain low through 2016.

It reinforced their views that easy money means the U.S. stock market rally has further to run despite notching a series of record highs already this year. That could easily put the S&P 500 benchmark on track to surpass 2000 for the first time, and to do so well before the end of the year.

Such a gain for 2014, after a 30 percent rise in 2013, would surprise those who worried that stocks might be getting overvalued and were due for a sizable pullback.

One reason for increasing confidence is that the resilience of the market has been very strong in the face of various shocks this year. A combination of an improving economy, rising earnings, and the cheap borrowing costs, has made that possible.

Stock investors have shaken off last year’s budget uncertainty in Washington, a sharp drop in high-growth technology companies and biotech shares, the conflict in Ukraine, and more recently the apparent tearing apart of Iraq that resulted in a spike in oil prices.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza