“The stock market as of late has been supported by all the monetary easing both at the ECB and the Fed. … Investors are weighing right now the positive of supportive monetary policy and the negative of the bad economic data,” comments Lin, who thinks that the Fed’s latest round of quantitative easing (QE3) will help the housing market, spur economic activity and lead to a higher stock prices. “If the housing market does recover … If that happens, then we are off to the races.”
Franz, however, thinks that QE3 will only be slightly positive, as “the interest channel has already come down,” meaning that consumers won’t refinance more just because mortgage rates are 10 basis points lower. To him, there are other issues that are affecting markets, irrespective of Fed policy: “The reason for what’s been subdued growth over the last year is Europe and China, slowing EM growth and the fiscal cliff. The domestic fundamentals are OK, you just have this big uncertainty hanging over you.”
Despite QE3 excitement and a host of economic data around the globe, the S&P 500 traded within a 15 points range for the whole week, something that traders think has to do with the triple witching expiry of stock options, index options and index futures on Sept. 21. In addition, Friday will see a reweighting of the S&P 500.
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