In an interview to CNBC-TV18 Tim Ghriskey, Chief Investment Officer, Solaris Asset Management spoke about his expectations from FOMC meet and the impact of QE tapering on US markets.
Below are the excerpts of his interview on CNBC-TV18
Q: What do you make of the fact that we had Asia close cautious or nervous or negative, we had Europe close negative ahead of Federal Open Market Committee (FOMC) decision but Wall Street continues to power on?
A: Yes it does. The rally continues and it continues despite the fact that bond yields stay high here. The bond market has traded significantly since the spring and it doesn’t seem to want to correct back down with yields falling down again and that certainly is a concern to us and the fact that insurance companies haven’t come in and started to buy bonds at these levels.
It means there is some nervousness about what the Fed is going to do but the stock market seems very complacent with this and the US seems to be again the market of choice for global investors.
Q: Does the stock market know something that we do not about the taper or is it possible that the underlying fundamental strength, at least in the last jobs numbers, which could be prompting this taper, is also what is helping stocks move higher?
A: That is benefiting stocks. The economic data has been a bit mixed since the spring month but still on balance it is positive. There is improvement in the economy and that is why Bernanke came out and talked the bond prices down, talked yields up and began to get the market use to the idea that tapering was going to occur and that they will not going to be buying as many bonds, as many US treasuries.
I do not think Bernanke was trying to shock the market and perhaps the market moved a bit more than he thought it would. But in general he was trying to pop that fixed income asset bubble and he has successfully done that. Now with expectation for a minor tapering, of course this will be the first in the series of taperings, the bond market can settle down here and begin to adjust to this new level of interest rates, and certainly not draconian levels of interest rates and realise that we are long way away from any increase in the Fed fund rates.
That type of environment will be certainly positive, continue to be positive for the stock market.