This week’s market action demonstrated the ability of some investors to endure pain. Others were pushed out of their equities and other elements of their portfolios by margin calls. After five days of losses, equity markets recovered substantially from Wednesday’s low.
The shares outstanding in iShares TIPS Bond ETF, a fund with more than 53 percent of its assets in long-term inflation- linked products, exceeded those of the FlexShares iBoxx Three- Year Target Duration TIPS Index ETF by 23,946 on Sept. 10, the lowest on record
Essentially, the Fed has been pushing stock and bond prices up to "bubblish" levels, in the expectation that they will inspire the kind of consumer spending, physical investments and hiring required to subsequently justify them. The hope is that the convergence will occur in the context of full employment.
Much as the Federal Reserve relies on “communication” and “forward guidance,” the task of clearly signalling its intentions to financial markets is not getting any easier in wake of the FOMC's surprise decision not to reduce asset purchases on Sept. 18.
Most Federal Reserve policy makers said the central bank was likely to taper its bond purchases this year, even as they unexpectedly refrained from such a move in September, minutes of their last meeting show.