Will The Federal Reserve Hose Down any Tightening Talk?

Markets moved higher in the US overnight, presumably on expectations that the Federal Reserve will hose down any tightening talk when Bernanke holds his press conference tonight. We say presumably because the Wall Street Journal tells us so:

After weeks of uncertainty about the course of Fed policy, jitters appear to have faded over the Fed slowing its program of bonds purchases. Starting in mid-May, concerns about a tapering of the Fed’s easing efforts sent Treasury yields higher and stock prices down from records.

Given the rally Tuesday, "investors are obv

iously anticipating the status quo [from the Fed], with no talk of immediate tapering," said Peter Jankovskis, co-chief investment officer at OakBrook.

But wait, what’s this?

The venerable Journal tells us elsewhere that gold fell because of the Federal Reserves expected tightening:

Gold settled at its lowest price in a month as investors prepared for the gradual end of the Federal Reserve’s stimulus efforts, which have been a catalyst for the market since 2008.

Or perhaps gold fell because ‘official’ US consumer price inflation came in weaker than expected, with ‘core’ inflation of 1.7%, below the Federal Reserve’s pain threshold of 2%.

If that is the case though, why have bond yields shot up across the board in recent weeks? Yields usually rise in response to rising inflation expectations.

The answer is that nothing makes sense anymore in a market under the control of a central banking authority. So we’re not going to try and make sense of it.

Regards,
Greg Canavan
for Markets and Money

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Greg Canavan is a Contributing Editor at Markets & Money and Head of Research at Port Phillip Publishing. He advocates a counter-intuitive investment philosophy based on the old adage that ‘ignorance is bliss’. Greg says that investing in the ‘Information Age’ means you now have all the information you need. But is it really useful? Much of it is noise, and serves to confuse rather than inform investors. And, through the process of confirmation bias, you tend to sift the information that you agree with. As a result, you reinforce your biases. This gives you the impression that you know what is going on. But really, you don’t know. No one does. The world is far too complex to understand. When you accept this, your newfound ignorance becomes a formidable investment weapon. That’s because you’re not a slave to your emotions and biases. Greg puts this philosophy into action as the Editor of Crisis & Opportunity. He sees opportunities in crises. To find the opportunities, he uses a process called the ‘Fusion Method’, which combines charting analysis with more conventional valuation analysis. Charting is important because it contains no opinions or emotions. Combine that with traditional stock analysis, and you have a robust stock selection strategy. With Greg’s help, you can implement a long-term wealth-building strategy into your financial planning, be better prepared for the financial challenges ahead, and stop making the same mistakes that most private investors do every time they buy a stock. To find out more about Greg’s investing style and his financial worldview, take out a free subscription to Markets & Money here. And to discover more about Greg’s ‘ignorance is bliss’ investment strategy and the Fusion Method of investing, take out a 30-day trial to his value investing service Crisis & Opportunity here. Official websites and financial e-letters Greg writes for:

 


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