The Federal Reserve in the United States currently purchases about $85 billion in assets every month. The reason for this is to provide more liquidity in the market and spur economic growth, which to their estimation, has been relatively moderate up to now. There is no concrete plan to taper any time soon.
Since the Fed has announced its asset-buying program, stock prices have rallied tremendously over time whereas bond prices have fell due to rising interest rates.
Some analysts have suggested that if job growth numbers remain poor as they were in October, the Fed will continue to foster its program. If the economic numbers become stronger, the Fed will likely cut back on their asset purchases. The uncertainty is one of the reasons leading to volatility in the market.
In my opinion, I believe that investors have become far too dependent on the government for its source of financial news. Every time there is even a small relatively irrelevant piece of news from the White House, the markets are quick to react. It is almost as if fundamentals are being thrown out of the building. But perhaps, for the more logical investors out there, there is still a decent probability of making a modest return as long as the Fed keeps up its program.
-Anxhelo Dhimitri
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