Invest Intelligence When It Realy Matters
Market Guidance from March 2012 Dividend Gems
Originally Published on March 13, 2012, Dividend Gems Opening Statement
In late January the Federal Reserve Bank announced that it intended to keep short-term interest rates at current levels until at least late 2014. This announcement has several ramifications.
First, it implies that fixed income yields will remain low for some time. This bodes well for the U.S. stock market.
Second, it increases the chance of a sudden and large rise in interest rates beyond 2015. This does not bode well for the stock market.
Third, it further increases the possibility of further quantitative easing, which is also likely to boost the stock market. While the Fed has indicated that it did not envision another phase of easing, its actions speak louder than their words, as Fed officials have already discussed a modified form of easing.
Last month we discussed that the S&P 500 Index was in the process of closing in on the very important gap at 1360. As of March 13 (intraday), the S&P 500 is trading at 1383, and has thus confirmed the bullish sentiment. Again, this is a very positive development that we feel was catalyzed by the interest rate announcement by the Federal Reserve in late January (chart 1).