The Fed Tapers and the Growth SLOWS

If you’ve ever been caught up in a case of really bad timing, then you probably know what the Fed is feeling right about now.

This morning, we received a dismal Gross Domestic Product (GDP) print that showed economic growth SLOWED to an adjusted annual rate of just 0.1% since the beginning of the year. That’s very, very poor, especially when you consider what the Fed just announced.

As expected, the Federal Open Market Committee (FOMC) opted to continue the “taper” of its current bond-buying program, announcing via the FOMC statement that it would reduce its monthly bond purchases to $45 billion from $55 billion. The decision was widely anticipated and the vote within the Fed was unanimous.

Now, the Fed did somewhat acknowledge the slow economic growth in a statement, acknowledging that recent data “indicates that growth in economic activity has picked up recently, after having slowed sharply during the winter in part because of adverse weather conditions.”

Yes, when all else fails, blame the weather.

Of much more importance than the Fed’s statement today was the reaction, or virtual lack thereof, in the equity markets. After 30 minutes of post-FOMC announcement trade, the S&P 500 index was up only fractionally.

The broad-based measure of the domestic market continues to trade well above its 50-day moving average and decisively above its 200-day moving average. Although this bull market may be tired, the technicals certainly suggest the bull is intact.

As for bonds, well, we saw more of what we’ve seen all year, i.e., we have seen bond yields fall and bond prices rise.

The benchmark 10-Year Treasury Note yield was down 1.4% after the first 30 minutes of post-FOMC statement trade, proving once again that the rising interest rates that most so-called experts thought would dominate the markets have failed to materialize this year.

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