We would love to hear your comments with regard to the timing and magnitude of Federal Reserve purchase reduction potential.

Back ground economic information that the Fed monitors and weighs heavily

They are uncomfortable with the low level of inflation and that argues for continued monthly purchases with little to no taper.

Unemployment is lower but the participation rate is lower as well. Since it hit the 7% threshold, that argues in favor of a taper.

Housing is showing signs of weakening but certainly not of falling off a cliff. Uncertain earnings guidance from a major homebuilder is worrisome and their stock is reflective of that as they are down in some cases over 2-3% today. This has been an area of strength so they may not want to burst this bubble.

Budget “deal” is reached and stocks sell off as taper has now been moved to the Dec time frame  (they meet next week) according to traders.

1. Does the Fed curtail purchases within the next 6 months?

2 How much do they decrease?

 OR

1. Will they be forced by deflationary forces to maintain?

2. Do they possibly increase?

We welcome predictions and thoughts in the comment section.

 

Sincerely,

Tom Koehler-CIO

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