The Federal Reserve recently began implementing their plan to help boost the U.S. economy – their $600 billion plan. The result: the S&P 500 immediately tumbled, reaching its greatest loss in three months. I’m not outright saying that there is a direct correlation; however, it is something to think about.
The Fed announced their stimulus plan back in August, so investors immediately jumped on this opportunity of money being pumped into the economy and began pushing stock prices higher and higher, which is why the stock market has been doing fairly well lately. I think all of this would have been okay had the following concerns never presented themselves:
* Ireland’s debt has continued mounting over the past few months
* The U.S. & South Korea have yet to reach a new trade agreement
* Europe & Asia have attacked the Fed for the failing U.S. dollar claiming that the U.S. is more focused on helping itself than the overall global economy.
These global economic factors have left the future of many stocks uncertain and some people are saying that this time stocks may not bounce back so quickly. The rise that we have seen in the past few months was based almost solely on the Fed’s promises – not on the world’s economic climate.
So maybe it is time for traders to stop counting on the Federal Reserve to deliver and go back to the basics. Trades need to be based on where the economy is currently, not where it may or may not be after a stimulus plan is put into effect. What do you think? Is the Fed helping our hurting our economy?