Ben Bernanke recently said the Fed is not overly concerned at the moment that there are bubbles forming in the financial system, although he stressed the Fed is “watching vigilantly” for such risks. Based on the Fed’s track record, there would be no bubbles if they had that foresight.
The New Year has started and not much has changed. All through 2013 we heard of an impending "bond bubble," a "stock market bubble" and a Europe expected to fly apart at any moment. It sounded like a broken record. But what happens? Nothing. Why?
The next Fed meeting is Jan. 28-29, and we believe this will serve as a rally-capping influence on equity markets. If the Fed executes another taper this month, we believe the S&P 500 will work on a correction, and possibly approach 1800.
Oil traders have to balance demand risks associated with a stock market sell-off vs. the possibility that the Fed may back off tapering after a terrible jobs report. An oversold market and an uncertain stock market may give the bears some pause.
The dollar slid to a three-week low against the yen before data tomorrow that economists said will show U.S. retail-sales growth slowed, strengthening the case against faster tapering by the Federal Reserve.
It is again quite confusing for gold fundamentals as it sounds like the Fed has a plan in place for tapering regardless of any economic data, whether it be jobs, inflation, consumer confidence, retail sales or any other type of economic data releases.