Dear Readership,

I took a brief assignment on Wall Street in NYC, so, in order to stay within the compliance guidelines, I had to take a sabbatical from this blog site. Now that I am back, our team is going to become more proactive in providing valuable insights on how macro-level economic events and movements will likely influence the overall stock market. This translates into how the S & P 500 will likely move which translates into Buy/Sell opportunities for SPY. But, we want to be careful with the disclaimer that we are not providing direct investment advice.

With that said, let’s start:

Generally bad economic news drives equity prices downward. However, with the Fed meeting approaching on November 2-3, the bad news per the recent increases in layoffs increase the probability that the Fed will implement Quantitative Easing (QE). In simplistic terms, QE is implemented when the Fed prints money and uses this money to buy financial assets, including government bonds, agency debt, mortgage-backed securities and corporate bonds, from banks and other financial institutions. Since the Fed is buying bonds, it has the effect of driving up bond prices while driving down interest rates. With more money to lend at lower interest rates, borrowing and spending are expected to increase. This, of course, drives stock prices. So, unless there are signals from the Fed that hint that QE will not occur, we envision the overall market will be buoyed up by expectations for QE. With earnings season upon us, we expect to see typical volatility associated with key earnings reports. We are holding back waiting for a dip before entering. We will report the date and purchase price when we make our move.