Good Morning. Today is the day. Like children nestled in their beds waiting for the arrival of Santa, investors anxiously await today’s speech. Will the Chairman deliver the goods? Will he broadcast to the global capital markets any shift in monetary policy? The answer is likely no. In fact, more may be garnered from what he does not say versus what he does.
The Chairman broke tradition, when in 2010 he discussed QE2 and clearly announced to investors what was coming in November. Two years later no such clarity has been given. Instead, the ambiguous use of words and threats to convince the markets to do the heavy lifting has been the policy tool. Why expand the balance sheet to raise equity prices and hopefully stimulate economic demand (perceived wealth affect) when a few words can move other people’s capital to accomplish the same result?