According to the Fed’s long-term plan, quantitative easing (QE) was to remain in effect until the economy was strong enough to grow on its own. This was the so-called anticipated “handoff” whereby a strengthening economy would take over from QE as the catalyst for growth. The problem is that it is not quite happening that way. With QE encountering diminishing results along with increasing unwanted side effects, it is gradually being withdrawn at a time when it appears that the economy has still not broken out of its approximate 2% growth trend. In addition, the stock market is facing numerous other headwinds including high valuations, excessively bullish sentiment, stagnant economies in Europe, a slowdown in China, and currency problems in many emerging markets. All in all, this does not bode well for the stock market in the year ahead.
DYI Comments: If this market is now in a downtrend then the Great Wait is over. However, the Federal Reserve may attempt to negate this from happening by more QE but it would only hold off the inevitable.
DYI
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