Market’s Fed Frenzy Can Finally End

Maybe now the Fed Frenzy can end. After months of market jitters about when the Federal Reserve would start tapering quantitative easing, we now know the central bank will trim its asset purchases by $10 billion monthly, starting in January. As I wrote previously, whether the Fed tapered now or in a few months would make little difference to the big economic picture. The change of Fed policy, the swan song for outgoing Chairman Ben Bernanke, is...

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You Would've Made A Ton Of Money If You Had Bought What Wall Street Said To Sell

I heard an amazing statistic earlier this year. According to Bloomberg, the 50 stocks with the lowest Wall Street analyst ratings at the end of 2011 outperformed the S&P 500 by seven percentage points in 2012.  Think about that. Warren Buffett's goal was once to outperform the market by 10 percentage points a year. Doing the opposite of what Wall Street's smartest minds recommended last year got you two-thirds of the way there.  As...

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BARCLAYS: First Reaction: 'Modest' Tapering With 'Soft' Inflation Floor

The following is Barclays Capital's first reaction to today's FOMC policy decision. "The Federal Reserve announced a reduction in the pace of its asset purchases in December, saying that the pace of purchases would decline to $75bn per month beginning in January from the current $85bn pace. The committee is reducing its Treasury and agency MBS purchases by $5bn apiece, leaving the new purchase rates at $40bn and $35bn per month, respectively.  The...

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Fed Taper Message Succeeds as Bonds Adjust to Economic Data

After misleading investors with a time line for tapering its unprecedented stimulus, the Federal Reserve now is stressing that any reduction in bond purchases will depend on the economic outlook -- and the message is sinking in. Officials surprised traders and roiled markets across the globe on Sept. 18 by maintaining their $85 billion in monthly asset purchases. Investors had clung to Chairman Ben S. Bernanke’s May guidance that he might taper...

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DEUTSCHE BANK - 8 Predictions & Trades For 2014

8 Predictions (and Trades):  1. Tapering will happen, and it won’t matter 2. US will take off, and it will matter - buy USD vs $bloc, short 5-year US rates 3. Capital outflows will rise – sell CHF and JPY 4. Political surprises will move to EM – short TRY and BRL ; long CNH volatility 5. Central banks mispriced – long Scandi FX / short Scandi rates 6. Volatility will rise – buy FX volatility 7. Inflation, not deflation will be problem...

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GOLDMAN SACHS: What To Expect From EUR/USD In 2014?

"We maintain our EUR/$ forecasts at 1.38, 1.40 and 1.40 in 3, 6 and 12 months. This implies EUR/¥ at 135.2, 144.2 and 149.8 in 3, 6 and 12 months. Compared with the UK, the upward revisions to consensus Euro area growth forecasts have been less spectacular. But they are still more notable than in most other countries. A number of additional factors support the EUR: -A large current account surplus of about 2.5% of GDP. -Moderate and stable...

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CREDIT AGRICOLE: Ahead This Wk's RBA Minutes, FOMC: A Buy Or A Sell?

This week’s RBA minutes should maintain AUD pressure in the wake of Governor Stevens’ comments this week. Suggesting that a fairer value for AUD/USD was closer to 0.85, the governor’s comments have prompted not only significant currency selling but also an adjustment lower in policy rate expectations. Reinforcing RBA board member concerns surrounding an inflated AUD TWI, this week’s minutes should therefore provide further fuel for bearish...

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Economists Around The World Have Been Slashing Their Inflation Forecasts

"The big story this year is not the US spending sequester, the China slowdown or the ongoing European recession," said Bank of America Merrill Lynch's Ethan Harris back in May. "The big story is inflation, or more precisely, the lack thereof." Seven months later, the lack of inflation is still arguably the big story. "Inflation continues to surprise to the downside," said St. Louis Fed President James Bullard on Monday. Low...

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Investors Aren't Displaying The Signs That Have Historically Marked Stock Market Peaks

Sentiment can be an important tool in measuring risk in the stock market. When investors get too bullish, it can be seen as a cautionary flag that the market may be due for a fall or a bubble is nearing its peak. Fortunately, investors are not currently displaying signs of optimism that have historically marked a peak for stocks. When we look at sentiment, we focus most of our attention on the actions taken by market participants, rather than...

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EUR Pain Trade – A Persistent Squeeze

As we go deeper into the month of December various forex trades will be capable of pushing investors down several market routes that sometimes make little sense. These directional trades tend to occur because of a lack of market liquidity - a questionable currency volume write-off. By this years "turn," this season will have throw forth some directional trades that will have confused and frustrated the average investor. Nevertheless, both this...

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There's Almost No Relationship Between The Magnitude Of GDP Growth And Stock Market Performance

Stock market investors should be rooting for low single-digit economic growth next year—and the reason why has nothing to do with the Federal Reserve (Fed). We forecast a low double-digit gain of 10–15% for U.S. stocks in 2014, as measured by the S&P 500 Index. This forecast for a slightly above- average annual return is rooted in our expectations for high single-digit earnings growth and a modest rise in the price-to-earnings (PE) ratio....

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NORDEA: Stay Long EUR/USD, Buy Cable At 1.6265, Sell USD/JPY Below 101.50

The following are the outlooks and strategies for the FX market this week as provided by Aurelija Augulyte, a senior analyst at Nordea Markets.  The EURUSD long from 1.3450 has performed, but now faces hurdle on the upside – the 1.3627, keep tight stop (1.3480). For the USD index (DXY 80.50) is key level: if we go below, the way for new recent lows opens up (EURUSD to 1.38+). If not, then EURUSD may well decline to as low...

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HSBC: EUR: 'Myth-Buster'

The EUR’s resilience in the face of a dovish ECB has encouraged a mistaken belief that the currency is being dominated by factors other than carry, notes HSBC. To make the case for that, HSBC challenges two popular arguments, concluding they are not the key drivers of the EUR. Myth 1: The EUR rise is being driven by the Eurozone’s improving current account balance. "If current accounts mattered in G10 FX, we would be buying the USD ahead...

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MORGAN STANLEY: EUR/USD Topping Out; Selling Season Begins

"EURUSD is trading at a premium relative to rates and yields. We investigate the reason for this EUR overvaluation and conclude that at current levels EURUSD offers good selling opportunities. Several factors work in favour of a weaker EURUSD. The Fed is preparing to exit quantitative easing while the ECB debates measures to ease monetary conditions further. The US has laid the foundation for an investment driven economic rebound, while the...

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