I guess this is the million dollar question nowadays…..Here is why?
Some like to use the rumors of whether “the Fed will or will not taper” to prove that markets move according to this idea. I too believe that this “whisper” did in fact play its role in price action. But only initially, to me, markets are really good at quickly switching to what should be the most currently relevant/appropriate focus and invest accordingly...
Here is a story that I think might better illustrate my point:
A minister told his congregation, "Next week I plan to preach about the sin of lying. To help you understand my sermon, I want you all to read Mark 17."
The following Sunday, as he prepared to deliver his sermon, the minister asked for a show of hands. He wanted to know how many had read Mark 17. The majority of the hands went up. The minister smiled and said, "Mark has only 16 chapters. I will now proceed with my sermon on the sin of lying."
My point here is not to question the majority of the audience raising their hands when not having “read” the chapter of the book….my point here is that the audience might have been tricked the first time, by the minister’s witty attempt to push his point across, but it’s necessarily doubtful that they will be tricked a second time.
And that’s exactly what occurred last Friday with the strong employment number. The markets did not sell off when asked if they had “read” the chapter. In fact, it had the exact opposite reaction: no one raised their hands! The “minister” thus had a very hard time proceeding with his “sermon” and helping them better understanding it!
Moreover, there are also those who claim that there is a rotation from bonds to equities that’s why markets soared on Friday….they are simply confusing the “affect” vs. the “effect”….as I have been recently writing, to me, stock buying, selling or rotating is affected by the strongest player effect…the markets no longer care if the boy cried “taper”!