The Federal Reserve has entered a two-day meeting Tuesday and Wednesday during which it will determine when to end its bond purchasing program.
Tuesday, October 28, 2014
In past rounds of quantitative easing, the market swelled, reported The Wall Street Journal. Once the stimulus ended, however, stocks retreated.
During the first instance, which occurred from December 2008 to March 2010, the S&P 500 gained 35%. But three months after the program ended, the S&P 500 had pared back 12%. In the second case, from November 2010 to June 2011, the index rose 10%, only to have fallen 14% three months later.
A similar trend may play out in the aftermath of QE3. But some economists do not believe it will be the end of quantitative easing forever. “QE will end this week but we know it’s clearly not dead,” Peter Boockvar, managing director at The Lindsey Group, told clients, according to The Wall Street Journal. “It’s not dead because many Fed members still believe in its efficacy – even though each new one has come because the previous one failed in generating sustainable growth – and we of course heard the calls for possibly more of it under stated circumstances.”
US indices open higher
Wall Street opened higher this morning behind solid corporate earnings, Bloomberg reported. The S&P 500 and Dow both gained 0.4%, while the Nasdaq added 0.5%. “The corporate sector seems to be alive and kicking,” Christian Gattiker, head of research at Julius Baer Group Ltd. in Zurich, told Bloomberg. “This is good news especially after the breakdown of confidence we had earlier this month.
The question is whether the market has to rely on central bank policy alone to drive asset prices higher. Certainly the earnings season so far shows there is some support from the corporate sector, too.”
Now, analysts await Wednesday’s statement from the Fed, which may determine where the market is headed from here.
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