Scotiabank: The Fed’s Increasing Optionality And The July 31 Taper

Scotiabank: The Fed’s Increasing Optionality And The July 31 Taper

If Fed action was based solely on getting the economy to a desired growth level, tapering discussions may not have arisen yet. Instead, the Fed likely would have continued to ‘buy’ as much time as possible to allow the economy to ‘heal’ further; and to get better clarity on the impact of the Sequester and outcome of budget negotiations.
In reality and as I have emphasized all year, Fed policy has to also weigh the costs, the risks, and the unintended consequences of buying assets at such an extraordinary pace. These concerns, combined with a slightly more optimistic FOMC, are why (the Minutes reported) ‘several’ members said a reduction in the amount of asset purchases is warranted and “half of the FOMC” wanted to end QE before the end of the year. At this point, the market would not be surprised at a tapering announcement as soon as the September meeting.

Hmm it may be time to lock in your profits, I am closing my SPY log tomorrow on Ben speak and will asses my next move considering a Long SPY Put we shall see.