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No Tapering… For Now.

Hey Market Pilot,

The Federal Open Market Committee (FOMC) minutes were released along with Jerome Powell fielding questions. Pretty much everything stayed the same, but they are conditioning the market to expect tapering, someday. Perhaps they would have been a little tougher on the taper talk if it weren’t for the Evergrande event. So they came in with another wait-and-see position.

We know that tapering will have to happen at some point, but will the market implode on the news? I think tapering as the catalyst for the start of a bear market is a little extreme, but there can certainly be a little weakness as traders would use it as an excuse to drive prices down. Right now, the market itself is doing great and so it would be a fine time to start enacting the idea. Even if the market did correct more stiffly due to the tapering, it would probably be healthier in the long run as the S&P 500 ETF (SPY) and Nasdaq (QQQ) are at very high levels. There is a cushion to work with.

The other concern is that if the FOMC leaves things as they are for too long, they lack the ability to handle any other bumps in the road that may come. Nearly 0% interest rates, buying so many bonds, and printing money, what more can they do if something else goes wrong? We know it is coming, but reducing the rate of money coming from the spigot is unlikely to kill the market. Traders and investors just have to take it into account and adjust.

Your Profit Pilot, TG

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