Why Rallies in S&P 500 Are Falling Short
With emerging markets in freefall and the potential reductions in Fed stimulus programs in the next few weeks, bullish investors have taken every available opportunity to capitalize on evidence of reduced uncertainty.
However, low volumes and a longer-term outlook that involves several key event risks means that the broader arguments for continued range trading remain intact.
On the positive side, discussions over collaborative agreements between Verizon
GDP Not Enough to Sustain a Rally
While the latest GDP figures are encouraging (and help support the Fed's view for growth into the latter part of the year), there is little reason to believe this data will be interpreted as positive enough to generate a sustainable rally. To be sure, the 2.5% GDP reading virtually ensures the Fed will have enough positive economic momentum to begin tapering its quantitative easing programs, but these reductions in stimulus will provide additional headwinds in equities for the next few months.
Since Fed stimulus has been one of the central drivers in the 150% rally in equities that we have seen since the March 2009 lows, reductions here could have unanticipated effects on investor sentiment as this historically accommodative era comes to an end. For those investing on broader time horizons, any dips fueled by changes in Fed policy will ultimately create buying opportunities -- but the most important figures going forward will be indicators of strength or weakness in the labor market, rather than headline GDP.