Having trouble figuring out the market lately? You’re not the only one. We’re up, we’re down, we’re excited, we’re confused. Those sentiments echoed through the global markets on Wednesday, as Fed Chairman, Bernanke, told the US Congress that the Central Bank’s $85BN/month bond-buying shopping spree may soon be coming to and end. While an all-out stoppage may not be on the near horizon, he did make several suggestions that in one it its “next few meetings”, The Federal Reserve will discuss a probable reduction.
Though that message seems direct enough, the Chairman’s posturing in recent weeks seems to tell quite a different story and so begins the nausea. In a policy statement made in early May, Chairman Bernanke left us guessing, explaining that the next move could be up, though it could also be down. Then Wednesday, minutes were released of the Fed’s most recent meeting which seemed to obfuscate things further – some may want to pare back the bond buying spree as early as June. And then of course, in Wednesday’s congressional testimony, Bernanke dizzied us further in saying that he may do nothing at all.
Having trouble keeping up? You’re not the only one. If you watched the market fluctuations during Wednesday’s testimony, it’s obvious that investors were reactionary at best. When the Chairman seemed to indicate his continued reluctance to deviate from the $85BN/month buying spree, the market was bullish, then angled downward when it seemed that he was still open to reducing the buyback program.
So, was Bernanke clear? Wednesday’s testimony left many scratching their heads, wondering what direction we’re headed and why we can’t have a smoother ride. Ultimately, the take-away from the meeting on The Hill was we’re not there yet, but we could be, and if you’re sick of it already, the only clear recommendation from the Chairman is to take Dramamine.