With the US Fed’s third quantitative easing program since 2009 announced in latter 2012, QE3, we know the Fed is explicitly targeting two key hoped for outcomes. First, Mr. Bernanke has told us he wants to see higher stock prices. So far, so good.
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Jeffrey Saut, Chief Investment Strategist at Raymond James, spoke with Financial Sense Newshour today to offer some perspective on the markets with a few key insights from their latest institutional investor conference.
While the dollar has come under severe pressure for many years, there have been several times when our dollar has gone on extended moves higher. Those moves higher typically coincide with slower growth outside of the U.S. and more often with some kind of crisis abroad.
Despite the ongoing recession call by the ECRI, the U.S. economy has continued to march forward from the depths of 2009 and, to the surprise of many, even accelerated this year. The question is, where do we go from here? Currently, in surveying both the coincident and leading economic data below, there still doesn't appear to be a recession on the immediate horizon. Furthermore, we may actually see GDP accelerate in 2013, which would be favorable for the U.S. stock market.
Breadth indicators were extraordinarily strong last week. The NYSE daily and weekly advance-decline lines hit all-time highs. The NYSE Unweighted Average, which eliminates the impact of large cap stocks, also hit an all-time high last week. Bears would argue that this leaves us no place to go but down. But, there are very few divergences in the market currently that indicate a selloff is imminent.
Various employment data shows continued improvement in the U.S., helping to support higher stock prices with the perception of economic recovery. As long as the employment situation continues to improve and recession risk remains low, US stock prices are likely heading higher.