Fed Will Have Final Word on Stocks This Week

As the stock market heads into the final stretch of what has been a very strong 2013, all eyes will be laser-focused on the Federal Reserve this week.
The central bank wraps up a two-day policy meeting Wednesday and investors want to know whether it will finally announce that its ready to pull back on, or taper, the massive bond buying program that has helped fuel this year’s mega-rally on Wall Street.

It looks like it could go either way. Analysts at Berenberg Bank wrote in a research note Friday that they see a 50% chance of tapering. Of course, that means there’s also a 50% chance the Fed will do nothing.
The Fed has been purchasing $85 billion in Treasury bonds and mortgage-backed securities per month, a program known as quantitative easing or QE for short, since September 2012. This is the third round of QE since the financial crisis of 2008 and many investors believe that QE is the main reason the market has soared since stocks bottomed in March 2009.
Stocks went on a wild ride in May, when Fed chairman Ben Bernanke first hinted in that the Fed may taper “in the next few meetings.”

via Markets to Fed: It’s game time, baby! – Dec. 15, 2013

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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