One day can make such a significant difference in stock market and talk about one week! If you missed last week's action then you pretty much missed significant gains in stock market. But what really happened on Friday the 13th which led the market gap up approx 100 points and continue its move up!!!! US Fed Chairman announced a bold step of stimulating US economy by pumping $40 billion more money (print more money) every month with NO end date. What does it mean!!!
All it means is US Fed will continue to print money till it sees unemployment rate go down to 7.6% in US along with keeping the interest rates down significantly til mid 2014-2015.
How is this good for rest of the world?
Is printing money good?
Macro picture:
We will be watching history in the making....
Nothing to add on below chart, market remains in bullish mode:
How is this good for rest of the world?
- US economy is by far the largest economy on Earth and is consumption based.
- Any measures to stimulate more growth here is expected drive growth in US as well as Globally
- Will it work!!! ONLY time will tell
Is printing money good?
- Not necessarily
- More money supply = higher inflation in future
- This will add more pressure on US dollar as it will start loosing its real value, in short dollar will depreciate against other currencies, not good for people holding assets in US dollar
Macro picture:
- ECB has decided to buy short term bonds from any Euro-zone country in financial crisis - But for how long?
- US Fed will print more money - Can it really bring more growth and increase GDP!!!
- All BRIC countries economy are slowing down - Where is the growth coming from!!!
- Short term: Root cause problems are not being dealt and simply applying bandage won't solve them permanently. For now enjoy the party till it last, come 2013 the fireworks shall start.
- Long term: At some point, one of the Euro-zone countries is not going to abide by rules and eventually default on their financial obligations causing Euro crisis and trigger chain of events. Dollar is not safe asset but among rest of the currencies it is less worse than others FOR NOW.
We will be watching history in the making....
Nothing to add on below chart, market remains in bullish mode:
Expect next resistance near 5600 area and possible pullback or closing of gap near 5400 area.
Resistance broken on weekly chart, Trend shall continue higher slow and steady.
What does it mean for our Investments?
Mutual Funds: Stay invested as market remains in bullish mode.
Stocks: Take advantage of such massive move and take partial profits along with raising STOP LIMIT.
Enjoy the party till it last....
Mutual Funds: Stay invested as market remains in bullish mode.
Stocks: Take advantage of such massive move and take partial profits along with raising STOP LIMIT.
Enjoy the party till it last....