Mike Burnick: What a difference a few weeks can make.
All eyes were anxiously watching the Federal Reserve in mid-September. The key question on every investor’s mind: Would they or wouldn’t they? (Taper quantitative easing, that is.)
The S&P 500 Index had recorded its largest monthly drop in 15 months in August. But the Fed surprised investors by keeping the current pace of $85 billion in monthly bond purchases.
Today the benchmark index is at a record, having jumped 24 percent this year, the best performance since 2003. Yes, investor sentiment has shifted dramatically.
[Editor's note: For more detail on where Mike sees potential outperformance, click here for an audio extra.]
Not only is tapering no longer the worry of the day, but apparently it’s not even on the horizon. Most commentary and analysis I’m reading has pushed the start of reducing the stimulus program well into 2014.
The government shutdown and prospect for continuing budget battles early next year has a lot to do with the shift in consensus. And the jobless rate, a key indicator for the Fed, is still too high. (The government finally got around to releasing it – 7.2 percent in September compared with 7.3 percent in August.)
As the graph above shows, there’s a strong tie between the size of the Fed’s balance sheet and the stock market’s rise. Ever since the Fed’s first round of QE in 2009, and with each successive expansion, the S&P 500 has responded almost in lock-step.
Shift in Stock-Market Leadership
The no-taper relief rally has been accompanied by a shift in stock-market leadership, which I pointed out several weeks ago. Specifically, the risk-on trade is back, featuring outperformance by economically sensitive assets that are considered riskier, including:(...)Click here to continue reading the original ETFDailyNews.com article: 6 Sectors That Are Sounding A Bullish SignalYou are viewing an abbreviated republication of ETF Daily News content. You can find full ETF Daily News articles on (www.etfdailynews.com)
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