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Still No Taper Until March?

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    November 11, 2013

    Traders seem confused as to whether the positive surprises in the 3rd quarter GDP report Thursday, and the positive jobs report yesterday, are positive for markets or not.

    The reaction to the positive surprise of the GDP report on Thursday was a sharp sell-off in stocks on the thought that it might prompt the Fed to begin tapering sooner, with the Dow plunging 152 points. But the reaction to the equally positive jobs report yesterday was a sharp rally, with the Dow closing up 167 points.

    The reaction of bonds to the positive GDP report on Thursday was a nice rally. But the reaction of bonds to the positive jobs report yesterday was a sharp sell-off.

    Gold’s reaction was not as confused. Gold closed down fairly sharply Thursday, and even more so yesterday.

    But neither report changed the consensus forecast of economists that the Fed will not begin tapering until March.

    Bloomberg reports a survey of 32 economists after the jobs report shows the consensus remains that the Fed will not begin tapering until March, the same as their previous survey of Oct 17-18. The consensus opinion was that the Fed needs more evidence of the economy improving than the one monthly jobs report.

    A former Richmond Fed governor, Stephen Stanley, said, “Part of the reason they keep putting off any pullback in accommodation is that they’re continually disappointed in subsequent reports.”

    Laura Rosner, economists at BNP Paribas and a former researcher at the New York Fed said, “This is the progress we need to see in order to be confident by March of next year. We’ll need to see a couple of more reports to make sure the strengthening in the labor market sticks.”

    None of them mentioned what I believe will also be factors in the Fed’s timing.

    As I’ve noted before, the Fed will likely delay tapering, if at all possible, until it sees how Congress and the White House make out with their second chance to reach an agreement on a spending bill, and raising the debt limit, before the delayed deadlines of January and February.

    And it’s highly probable that Chairman Bernanke would much prefer not having the taper decision take place in the final meetings of his term, which would leave his successor, Janet Yelen, to face the consequences of its rightness or wrongness.

    But traders voted one way Thursday and the other way yesterday.



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    About The Author – Sy Harding, Street Smart Report

    Sy Harding publishes the financial website Street Smart Report Online and a free daily Internet blog at Sy’s Free Blog. In 1999 he authored Riding The Bear – How To Prosper In the Coming Bear Market. His latest book is Beat the Market the Easy Way! – Proven Seasonal Strategies Double Market’s Performance!

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