20
May
2013

ETF Periscope: Wall Street Shrugs Off Fed’s Musings Regarding Turning Off QE Tap

Some of us think holding on makes us strong; but sometimes it is letting go.” -- Herman Hesse

This is one obsessed Bull that is raging through Wall Street at the moment.

Not even last Thursday’s potentially destabilizing comments by a Fed official, who essentially said that the current round of bond purchases by the central bank could begin tapering off within the next few months, did much to give investors pause.

The market’s upbeat sentiment kept rolling right along, as yet more record highs were hit throughout the week.

The Dow Jones Industrial Average (DJIA) added 1.6% for the week, while the tech-laden Nasdaq Composite Index (COMP) gained 1.8% over the course of the same time period. Meanwhile, the S&P 500 Index (SPX) added another 2.0% to its weekly bottom line, putting it up 17% year-to-date.

Rationally speaking, it could be construed as being a little odd that the threat of turning off the QE spigot, the very same one that has effectively been the chief source of fuel for the current bull market, did not shock the market into a deeper retreat than the shedding of a handful of S&P 500 Index points.

So what gives?

Do investors really feel that the economy is robust enough to maintain its small rate of growth, even without the $85 billion per month in bond purchases the Fed presently makes each month?

Maybe.

Did the results of the Q1 earnings season really convince Wall Street that the Fed’s largess is no longer required, in spite of the fact that expectations were set pretty low to begin with?

Apparently.

Thursday’s slight retreat by the equity market was handily offset by Friday’s gains, which were mainly attributed to an improvement in the University of Michigan and Thompson Reuters Consumer Sentiment Index, coupled with a rebound in the Conference Board Leading Economic Index, a leading global business cycle indicator.

So according to investor sentiment, the latest dribbles of economic data trumps any fear of consequences that might result from the Fed actually tamping down on the stimulus spigot, the very thing that has goosed the market for the bulk of the last several years.

Go figure. Any contrarians out there might take last week’s market action as a cue to follow through on their long-simmering bearish plays.

Just beware of any obsessed Bulls that may be unperturbed by such logic.  

What the Periscope Sees

The Sabrient SectorCast ETF Rankings rate each of the ten U.S. industrial sector iShares (ETFs) by Sabrient’s proprietary Outlook Score and are revised on a weekly basis. This week finds Consumer Goods atop the SectorCast Rankings for one of the few time this year, followed closely by Financial and Technology.

IYK (iShares Dow Jones U.S. Consumer Goods Sector Index Fund) is up 20.40% year-to-date, as of the third week of May.

ETF Periscope

Full disclosure:  The author does not personally hold any of the ETFs mentioned in this week’s “What the Periscope Sees.”

Disclaimer: This newsletter is published solely for informational purposes and is not to be construed as advice or a recommendation to specific individuals. Individuals should take into account their personal financial circumstances in acting on any rankings or stock selections provided by Sabrient. Sabrient makes no representations that the techniques used in its rankings or selections will result in or guarantee profits in trading. Trading involves risk, including possible loss of principal and other losses, and past performance is no indication of future results. 

Consumer Goods Sector, Federal Reserve Board, FED
daniel / Tag: DJIA, COMP, SPX, IYK /