Markets Can Handle it if Fed Doesn’t Do QE3: Ken Polcari
It's all about expectations on Wall Street. As long as you meet or exceed them, you're fine. Even if that means delivering a dose of bad news, the market can handle it as long as you don't sneak up with a surprise. That's the worst. If you fail to manage the minds of the masses, who slug it out in the trenches and trading desks, than simply put, you're in for a world of hurt.
Earnings results are a prime example. Profits can be down precipitously yet be taken in stride by investors who saw it coming via their estimates. The same holds true for economic data or even meeting decisions by the Federal Reserve.
I say all this, because there's a belief out there that the stock market is poised to freak out if Ben Bernanke doesn't deliver the goods on Thursday by uncorking another half-trillion dollars of stimulus, a notion that NYSE veterans like Kenny Polcari strongly refute.
"I don't want them to do it. I don't think they should do it," Polcari says in the attached clip of the potential for QE3.
"They do enough by jawboning and look what has happened over the last six or seven weeks," the ICAP Managing Director says of a 9%, 3-month rally that he says has been fueled "only with the discussion of (the Fed) standing ready to offer support."
That's not to say that the Fed can just do nothing. In fact, even our own unscientific survey showed a majority of respondents are prepared for no easing, but that doesn't mean the Fed doesn't have to offer up some tantalizing words to chew on; specifically an extension of the extraordinarily low rates target out until 2015.
"The economy is horrendous and jobs are not coming back and housing is still weak and all that, but the Fed doesn't necessarily need to do anything to help support the markets," Polcari adds. "As long as investors think there's a floor underneath, that the Fed will be there if the bottom falls out" he says, then things should be fine for a while.
Fine that is, as long as there are no surprises and they start on red-alert, remain liquid, nimble and prepared to fend-off such threats as the fiscal cliff that's coming in January.
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It's Time for Bernanke to Declare the Party Over: Peter Schiff
3 Reasons the Fed Should Avoid QE3
