EmailToday is December 12, 2012. In abbreviated form, it is 12/12/12. It is only fitting that things would line up today in accordance with expectations.
To wit:
- North Korea has shown that it continues to be the great agitator on the Korean Peninsula, having launched a rocket into space in a move viewed by Washington as a breach of U.N. rules and a provocative action.
- A fiscal cliff compromise remains elusive as Congressional leaders and the White House continue their public sparring over the best path to compromise and
- The FOMC will announce QE4, indicating Operation Twist will be replaced with a program to buy an additional $45 bln in long-term Treasury securities per month
It is possible that the FOMC dreams up another plan, yet the latter is the prevailing expectation in front of the 12:30 p.m. ET policy announcement. Updated economic projections from the Fed will be released at 2:00 p.m. ET and a press conference held by Fed Chairman Bernanke to discuss the policy directive and economic outlook will follow at 2:15 p.m. ET.
There was some chatter yesterday that the market was frontrunning a QE4 announcement. That is plausible, but it is not as if the market hasn't had a sense for a few weeks now that QE4 is likely on its way. The S&P 500 has increased 5.5% since November 15. In other words, QE4 has been ostensibly priced in already.
In fact, the S&P 500 is on the cusp of completing a round trip from the September meeting to today's meeting.
If the opening indication holds, the S&P 500 should increase about 0.4% at the start of trading. That would push the index to the 1433 area. On September 12 -- the day before QE3 was announced -- the S&P 500 closed at 1436.56.
The unspoken message in the thought above is that the Fed hasn't gotten as much bang for its QE3 buck so far as it might have hoped. If its aim is to help inflate asset prices by holding down long-term interest rates, QE3 has fallen short so far in boosting equity prices.
To be fair, there have been a lot of other distractions for the market since the September meeting, but some of the shine appears to have been taken off quantitative easing as a market driver.
In effect, quantitative easing is acting more like a safety net for the market now that keeps selloffs in check as opposed to the rocket booster it acted like with QE1 and QE2.
Happy 12/12/12!
