fed bond buying: Unemployment, Fed Bond Buying and Investing in Stocks
- 09/10/13 09:43 AM
They are close first cousins although it doesn't seem obvious at first. The stock market should go down when the economy is doing poorly and the companies are reporting poor results. Right? Wrong! Stock prices respond to many seemingly unrelated things such as Fed bond buying. The Fed is buying $85B of bonds per month to keep borrowing costs low to stimulate the economy. When are they going to stop? Well, when unemployment dips or inflation rises. Inflation has been below 2% and we added an anemic 169,000 jobs last month, below the minimum threshold of 200,000 that the economists want. (2 comments)