On a CNBC program (Into the Futures), Friday noon, Jackie DeAngelis, took a quick look at what’s in store for the market this week. What’s the best way to play this week’s Fed announcement? “The FOMC is expected to continue on autopilot at the meeting on Tuesday and Wednesday and tapering will very likely continue – bringing the Fed’s monthly asset purchases to USD35bn” (ActionForex). Jim Iuorio and Scott Nations discussed these, and some other topics, with Jackie DeAngelis.
First off, what’s “tapering”? “Tapering” refers to the reduction in the size of the U.S. Federal Reserve’s bond-buying program, known as quantitative easing (QE). The program was conceived as a stimulus for the economy, but in practice, it has also helped support the financial market performance.
Regarding this issue, Jim Iuorio stated:
“I think they [the Fed] will continue with everything as planned; with a $10 billion dollars taper. The wild card here is that the increased debt of ‘15, with the situation that seems to be heating up in a rack, I don’t think they could do that right now. The ironic part is that, absence of that, the Fed could accelerate tapering, just because of the fact that the ECB and the BOJ still keep throwing the pudding in the system, and people will be probably buying our bonds anyways. But definitely keep an eye on Wednesday [on the Federal Reserve Open Market Committee, FOMC, meeting], it will be interesting”
Following, Scott Nations talked about his best trade this week:
“I want to be sure at the SoP, for some of the reasons that Jim has laid out, and he’s talking about the Fed, which is absolutely vital (…) Middle of last week, the taper going to $15 billion a month; that was actually probably going to happen. And on Monday of last week, the Fed’s speak was really chesty. People saying that they really wanted to increase interest rates faster than we would have thought. Now, given the way that Iraq dominated the news of last half of last week, we’re probably not going to see some of that, but they will keep the track of the taper, and that’s actually probably not all that the stock market needs. The stock market needs them to be a little bit more dovish right now.”