If we want to stay ahead of market cycle, very important to keep up to date with latest news. I was just reading this morning that US Federal Reserve might slow the pace of debt purchases designed to boost economic growth before 4th quarter. It seems that FED won't start to reduce their $85 Billion monthly bond buying until the last 3 months of 2013, they might end it in mid 2014 or later.
The "wise" Fed chairman Ben Bernanke supposedly an expert in Great Depression, has pumped more than $2.5 trillion into the economy for two main reasons: Employment & Price Stability. Maybe i am a critic, i do not think pumping money has created more jobs. In fact, it is delaying the inevitable recession, creating asset price bubbles along the way. What is the benefit of this stimulus anyway? The US has a sluggish economy, unemployment in March was @ 7.6%.
I am convinced this easing policy creates serious risks to the financial system over the long term, it is kind of putting me off because my previous estimation of when a recession is coming might be delayed further. However i do understand (to certain extent) why Bernanke has taken such actions, the US economy would have been in much worse shape if the Fed did not interfere (thats a fact), but many things have been standing in the way, limiting the impact of the monetary easing going forward.
What are the implications? What to look for?
Whether we like it or not, Singapore and the rest of the world is tied to what happens in the US. The economy is very interest-rate sensitive, so if the Fed cuts support too early, the market will over-react and we would see a spike in yields and we're back to slower growth. Majority of Fed officials anticipate raising interest rate until after 2015 as unemployment dives below 6.5% (thats is their prediction).
Number to look at: Interest rate will rise as soon as unemployment is below 6.5%, inflation is 2.5% average or less. General consensus is this will only happen mid 2014 to early 2015...!
What does it mean for our investment strategy?
Those of us owning a home: Stick to your Sibor-pegged home loan till interest rates start going up, then refinance to fixed-rate to lock in a lower interest rate.
Those holding onto securities: prepare for short term pull-back, followed by another massive bull-run till Feds pull out of easing policy.
Disclaimer: Please seek proper advice as to your investment strategy, perform your own due dilligence before investing. The above mentioned in article are just my take on the economy, others may differ in their opinion.
The "wise" Fed chairman Ben Bernanke supposedly an expert in Great Depression, has pumped more than $2.5 trillion into the economy for two main reasons: Employment & Price Stability. Maybe i am a critic, i do not think pumping money has created more jobs. In fact, it is delaying the inevitable recession, creating asset price bubbles along the way. What is the benefit of this stimulus anyway? The US has a sluggish economy, unemployment in March was @ 7.6%.
I am convinced this easing policy creates serious risks to the financial system over the long term, it is kind of putting me off because my previous estimation of when a recession is coming might be delayed further. However i do understand (to certain extent) why Bernanke has taken such actions, the US economy would have been in much worse shape if the Fed did not interfere (thats a fact), but many things have been standing in the way, limiting the impact of the monetary easing going forward.
What are the implications? What to look for?
Whether we like it or not, Singapore and the rest of the world is tied to what happens in the US. The economy is very interest-rate sensitive, so if the Fed cuts support too early, the market will over-react and we would see a spike in yields and we're back to slower growth. Majority of Fed officials anticipate raising interest rate until after 2015 as unemployment dives below 6.5% (thats is their prediction).
Number to look at: Interest rate will rise as soon as unemployment is below 6.5%, inflation is 2.5% average or less. General consensus is this will only happen mid 2014 to early 2015...!
What does it mean for our investment strategy?
Those of us owning a home: Stick to your Sibor-pegged home loan till interest rates start going up, then refinance to fixed-rate to lock in a lower interest rate.
Those holding onto securities: prepare for short term pull-back, followed by another massive bull-run till Feds pull out of easing policy.
Disclaimer: Please seek proper advice as to your investment strategy, perform your own due dilligence before investing. The above mentioned in article are just my take on the economy, others may differ in their opinion.
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