The Federal Reserve System’s long dreaded taper fade has finally been announced. After leading on the markets for some time now, the fed-heads in charge of printing and minting currency, along with confidence, have decide that the time has come for a multi-billion dollar taper fade to be implemented.
Stocks have shot up on the news that fed-heads in charge of the Federal Reserve System have actually decided to take on the taper that they’ve been hinting would eventually happen. The reasons cited by the money wizards behind the curtain were that we now have a stronger economy, which among other things signals an appropriate time to begin scaling back the $85 billion a month bond purchase stimulus to something more conservative. The more conservative figure that has been agreed upon is a taper fade special of $10 billion a month, leaving the new monthly bond purchases at $75 billion.
Investors had for quite some time been frustrated at the wishy-washy position taken by the fed-heads, namely Bernanke, regarding whether or not the time was right to implement the taper they had talked about for so long. Now, as news of the decision to finally taper begins to circulate, the markets reaction shows how investors feel about the Federal Reserve System’s decision. The stock surge can be interpreted as a sort of digital smile, wink, and hair-toss from investors back in the direction of the fed-heads who have been leading them on for so long.
The Dow jumped more than 200 points in less than one hour after the announced taper, whereas just prior to the taper announcement the Dow was only up a mere 47 points. The S&P 500 along with Nasdaq followed suit, rising 1.0 percent and .05 percent respectively.
The $10 billion taper fade is set to begin in January, but already has shown itself to be a welcome bit of news to investors. The Federal Reserve System’s financial wizards seem to be making a statement with the recent decision. The announcement may seem to imply that the recent actions are a sign of good faith tossed across the bow to investors who had been getting tired of having their expectations and feelings disregarding by all the unexpected pivots by fed-heads regarding the implementation of the mythical taper.
The decision to taper now comes as somewhat of a surprise to investors, though not totally unexpected as Bernanke had clearly been tossing the decision around for some time. What appears to have taken some by surprise is the timing of the decision, which most expected to be made after the first quarter of 2014.
It appears as though the decision to taper will be supported by the incoming fed-head Janet Yellen. Ben Bernanke, in a recent statement made to the press, made it clear that he had consulted with the incoming leading lady of banking, and that Yellen “fully supports” the decision to taper.
The timing of the decision has translated into a nice boost to the markets as the fiscal years draws to a close, and with the response, it is clear that investors view the decision in a somewhat positive light.
As the statutory stitching that holds together the precarious global economic system gets pressed, every bit of confidence is sure to go a long way for the fed-heads and financial engineers in charge of maintaining the domestic and international money-go-round. This latest action will presumably buy the necessary confidence to keep the engine running until further notice.
The future remains unknown, but today’s news is that the Federal Reserve System’s mythical taper has finally arrived to the tune of $10 billion a month.
By Daniel Worku