Tuesday, August 6, 2013

Stock Market: Welcome Again, Taper

(Drivebycuriosity) - The stock prices dropped today. According to the media the market responded to new talk about the taper, meaning the gradually reduction of the Federal Reserve Bank stimulus program QE3 (massive purchase of government bonds). At least one Fed official declared today that tapering is "quite likely by year-end" (marketwatch). The topic appeared already in June as the Fed announced that QE3 could end through summer 2014 (driveby).  Since then the stock market responded ungracious when any Fed official reminded to the tapering announcement, but stock prices gained in this time around 3% anyway.

I welcome tapering. The economy doesn`t need massive stimulus measures anymore. It seems that the U.S. is now growing faster as in the first half of the year (driveby). The service sector, which has the lion share of the economy, accelerated in July and manufacturing also gathered speed. A continuous massive stimulation of the economy could lead to a overheating.

Today we already got a positive response to the taper announcement. The price oil price fell around 1%. In the recent weeks hedge funds and other speculators had pumped billions of dollars into oil futures and had driven the oil price from $95 to §110 because they speculated on more stimulus by the fed. It seems the taper talk gives the oil speculation a break.

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