And just like that, the worst storm to hit the markets in 26 months appears to have come to an end, at least for the moment. All in, this temporary pause in the Dow’s (^DJI) climb amounted to a whopping 3.7% haircut, before reversing itself today. And this from an index that has doubled in the past five years.
“We’re getting some stabilization out of Asia,” says Jim Jubak, senior markets editor at Moneyshow.com in the attached video, “but it still depends on what the Fed does on Wednesday.”
Also of note is the fact that the slump ended on the very same day that the previously robust durable goods data also took a turn for the worse. Officially, the December reading on manufactured goods built to last at least three years saw a 4.3% decline last month, far weaker than the 2.1% gain economists were expecting. At first the news did not sit well with investors, but in no time, the big picture was back in play again, and bad was once again was good, at least as far as U.S. data is concerned.
“The thing is, the U.S. economy is not the top of mind issue at the moment,” Jubak says, adding that issues further afield in emerging markets like China and Brazil are having a bigger impact on global investor psyche.
To that point, Jubak points out that as much as tapering and a return to so-called normalcy (somewhat) has been a confidence booster here, the same is not true overseas.
“The Fed tapering has a big effect on emerging markets,” he says, adding that fears of an outright shortage of dollars are roiling currency rates at the moment.
Even so, he expects the Fed will hold its course for the time being and maintain its open market bond purchases beyond January at the reduced pace of $65 billion a month.
Normally, that type of pause in policy could be seen as a sign of weakness, but Jubak says in this atmosphere, “it’s market positive.”
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