Making Money Alert: It’s Central Bank Week

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.

[youtube_sc url=”http://youtu.be/oUMY–kIwfE”]

This week’s market action is going to be dominated by two central bank events. We got the first of these today with the Federal Reserve Open Market Committee’s (FOMC) decision on interest rates, which they predictably left unchanged and nearly zero. What was more important to the market was whether the Fed would extend its zero interest rate policy, a.k.a. ZIRP, until 2015. The Fed only reiterated the need for ZIRP through 2014, and that prompted a bit of selling right after the FOMC statement was released.

Now, some bulls were hoping that Fed Chairman Ben Bernanke and his colleagues would pull the trigger on more quantitative easing, but that didn’t happen. I didn’t think the Fed would step in with “QE3,” and the reason why is that economic conditions here in the United States aren’t bad enough for more stimulus (at least not yet). Stocks are holding up well despite a European-led global slowdown, and there just isn’t enough of a panic factor flowing through the economy’s veins yet for the Fed to begin administering the stimulus injection.

The Fed also is likely waiting to see what happens with the European Central Bank (ECB), which holds its policy meeting on Thursday. The Fed wants the ECB to move first to add liquidity into the global system, and that’s likely what we’ll get tomorrow, at least that’s what everyone expects, given ECB President Mario Draghi’s pronouncement last week that it would do, “whatever it takes to preserve the euro.”

If we don’t get some kind of expected policy response from the ECB tomorrow, global equities will likely come under a lot of selling pressure.

Exclusive  Eagle Eye Opener: Markets Bounce on Bernanke's Quantitative Easing Promise; Microsoft Reorganizes; House to Discuss Food Stamps

As for today’s message from the Fed, in its FOMC statement, the central bank wrote, “Economic activity decelerated somewhat over the first half of this year.”

The Fed also wrote, “The committee will closely monitor incoming information on economic and financial developments and will provide additional accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.”

There is nothing really new here, but I read this statement as a sign that the Fed could come out with some form of QE3 if the economy gets much worse in the next few weeks. Remember that the Fed always can call for an impromptu meeting to announce QE3. Fed Chairman Bernanke also will be speaking at the Jackson Hole central banker conference in about a month, and that’s where he first alluded to QE2 two years ago, and that’s the policy that was adopted in the subsequent Fed meeting.

For now, the best approach to this market is to be patient, and wait and see how the ECB meeting turns out Thursday. You also will want to wait and to see the market’s reaction to the release of the July employment report on Friday morning. If that metric comes in well below expectations, it could be the catalyst the Fed needs to pull the trigger on QE3.

If, however, we get more of the same kind of muddling along, anemic job growth of the kind we’ve seen recently, the Fed could very well sit on its hands for a lot longer. Either way, I’m waiting for a definitive trend to develop before committing my chips into the equity pot.

Exclusive  Eagle Eye Opener: Is there Instanity in Fed Policy?; Nokia Parners with China Mobile; Netflix Rises

On Courage

“Courage is grace under pressure.”

–Ernest Hemingway

The great American author is known for his heroism in battle, his passion for life and his penchant for self-destructive behavior. Hemingway lived through a lot of pressure in his eventful life, but the man always displayed a sense of grace and courage throughout. This is a characteristic all of us should aspire to display.

Wisdom about money, investing and life can be found anywhere. If you have a good quote you’d like me to share with your fellow Alert readers, send it to me, along with any comments, questions and suggestions you have about my audio podcast, newsletters, seminars or anything else. Click here to ask Doug.
To the best within us,


Doug Fabian

P.S. Today’s challenging market conditions require even more knowledge than ever for investors and traders like you to keep pace with the latest market intelligence to safeguard your portfolio and to profit from opportunities that only may be available for short periods of time. Join me at this year’s MoneyShow San Francisco, August 24-26, at the San Francisco Marriott Marquis to hear recommendations and advice about how best to profit in 2012 and beyond! Register FREE today by clicking here, going to DougFabian.sanfranciscomoneyshow.com or by calling 1-800/970-4355 and mentioning priority code 027879.

previous article

The ongoing global economic slowdown has impacted nearly every sector, including information technology companies. But that sector benefits from new smartphone rollouts and other technology innovations. For those reasons, the sector may warrant higher valuations than it has been receiving lately. The Vanguard Information Technology Index Fund (VGT) is an exchange-traded fund (ETF) that may let investors collect sizable returns as the information technology sector rises and equit

PREMIUM SERVICES FOR INVESTORS

Dr. Mark Skousen

Named one of the "Top 20 Living Economists," Dr. Skousen is a professional economist, investment expert, university professor, and author of more than 25 books.

Product Details

LEARN MORE HERE

Bryan Perry

A former Wall Street financial advisor with three decades' experience, Bryan Perry focuses his efforts on high-yield income investing and quick-hitting options plays.

Product Details

LEARN MORE HERE

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker,
financial journalist, and money manager. As well as a book author and regular contributor to
numerous investment websites, Jim is the editor of:

Product Details

LEARN MORE HERE

Bob Carlson

Bob Carlson provides independent, objective research covering all the financial issues of retirement and retirement planning. In addition, Bob serves as Chairman of the Board of Trustees of the Fairfax County (VA) Employees’ Retirement System, which has over $2.8 billion in assets.

Product Details

LEARN MORE HERE

Mike Turner

Mike Turner’s financial, mathematical, computer science and engineering background serves as the foundation for his disciplined, rules-based approach to trading. Mike’s three services include:

Product Details

LEARN MORE HERE

Hilary Kramer

Hilary Kramer is an investment analyst and portfolio manager with 30 years of experience on Wall Street. Since 2010, Hilary's financial publications have provided stock analysis and investment advice to her subscribers:

Product Details

LEARN MORE HERE

DividendInvestor.com

Used by financial advisors and individual investors all over the world, DividendInvestor.com is the premier provider and one-stop shop for dividend information and research.

Product Details

Popular tools include our proprietary Dividend Calendar, Dividend Calculator, Dividend Score Card, and many more.

LEARN MORE HERE