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My day did not end well yesterday. In my ADVFN story, “How Will Weak US Economy Affect Us?” I warned of gloom and doom on the world economic scene as a result of a weak US first quarter. I pointed to the Dow Jones, the S&P, and the Nasdaq all opening down following the release of the US first quarter results and the imminent displacement of the US by China as the world’s leading economy. So, what happens? The Dow recovers and closes at a record high! You have got to be kidding me!
The Dow closed at 16,580.84, surpassing the previous record of 16,576.66 set on 31 December 2013.
The S&P missed a new record by a mere 0.4%.
This is downright embarrassing for me, and for all men in general. Apparently, not since Helen of Troy has one woman had the singular power to influence the masses as Janet Yellen did yesterday with her Federal Reserve report. (It had to be the report. Unlike Helen, her face just isn’t going to get it done.)
Yellen’s report said that the US economy is gaining momentum, which is a pretty bold statement in light of a GDP growth of only 0.1% from January through March. Her claim is based solely on an increase in consumer spending, seeming to purposely ignore the lackluster GDP.
All that Yellen offered was a fourth straight $10 billion reduction in bond purchases whilst promising that the Fed would continue to ease back over a measured amount of time. Interest rates will continue near to zero percent.
What Others Are Saying
Kristina Hooper, investment strategist at Allianz Global Investors described the response as a case of “No news is good news. This announcement is more of the same in terms of underscoring that the Fed is going to remain very accomodat[ing].”
I agree with Walter Todd, CIO at Greenwood Capital Associates, who says about the Fed report that “The Fed seems to be putting aside the weakness in the first quarter that the market reacted to this morning. Perhaps if you’d seen the Fed react more dovish to a weaker first quarter, that would’ve been more negative.”
My One Saving Grace
Actually, I still stand on most of what I said yesterday, especially in the long term. As for what might otherwise be the embarrassing short term, I was able to rest well last night after re-reading the part of my column that said, “I am not a prophet or a seer. The fact is that the US markets could rebound during the day.”
Come to think of it. I don’t feel so bad after all.
