Global Macro: Will the Bubble Pop?
NEW YORK ( TheStreet) - Investors' belief that the Federal Reserve won't reduce its bond-buying program in December may lead to a year-end rally.
Since inflation remains low and central bankers appear to be committed to keeping policy accommodative, it looks as if investors have begun to price in tapering in March, which should mean more money flowing into equity markets until then.
It is, of course, easy-monetary policy that has allowed markets to achieve their current lofty levels. During the entire ride up, analysts have called for a pullback, but a considerable pullback has never come. Even the volatility created by the government shutdown in October was just a springboard for further highs in November.
The strategy for investors over the past few months has been to simply pile on the wave because if you buy today and then in one week or month your money will at least be up another percent.Although this looks like bubble conditions, there is justification for such action. Bond yields continue to fall as stimulus remains in place. Fixed-income investors have slowly realized there is no money to be made in bonds, and therefore they have become equity investors. (SPY) shows a strong uptrend since 2012. Negative events have occurred along the way, but nothing strong enough to knock equities off of their path higher. Expect this trend to continue into 2014 as news remains sparse and volume light. At the time of publication, the author had no position in any of the stocks mentioned. Follow @macroinsights This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts