A couple of posts ago ("Central bank-speak, north and south", June 20) I wrote: If markets sell off when the central bank forecasts higher economic activity, it's reasonable to infer that the gains posted by the US equity market in the first half of 2013 have been driven not by investor perceptions of underlying economic strength, but by the tsunami of cheap money that the Fed and other central banks have seen fit to unleash.
Well, this morning it was revealed that the US economy grew more slowly than previously thought in the first quarter of the year. Not good news, you'd think -- unless you're an equity investor, that is. Stocks on the big board jumped almost 1% at the open in New York, as investors interpreted the data as an indication that the Fed might not be able to ease up on its QE program as quickly as some had feared.
It's going to be interesting indeed to see whether Ben Bernanke and his pals at the Fed hold their nerve if the evidence continues to suggest that most of the "strength" in equity markets is a direct result of money printing.
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