Tags: david | frazier | election | stocks | fed

Election Day and the Fed: Buy the Rumor, Sell the Fact

Tuesday, 26 Oct 2010 12:19 PM

Seven days from now, Americans across the country will elect government officials to represent them in the U.S. Congress and in their respective states. The following day, the Federal Reserve will issue its latest statement regarding the Fed’s monetary-policy plans for the months ahead.

Recent election polls indicate that members of the Republican Party will take control of the House of Representatives and gain seats in the Senate.

Meanwhile, most stock-market participants and economists expect the Federal Reserve to announce on Nov. 3 that it will soon begin a new wave of quantitative easing – that it will increase the amount of money that banks can lend by purchasing large amounts of U.S. government securities.

How to Make Money Off Barack Obama’s $819 Billion “Stimulus Plan”

As a result of those expectations, stock prices trended higher during the past eight weeks, with the Dow Jones Industrial Average rising 1139 points (11.5 percent) and the S&P 500 Index advancing 13 percent from Sept. 1 to Oct. 25.

Although some stock-market participants expect stocks to continue to rally during the weeks ahead, my experience suggests that stocks might pull back substantially following the outcome of the midterm elections and the Federal Reserve’s announcement on its monetary policy. That’s because investors have likely already factored those factors into the market.

If the Fed doesn’t give a clear indication of the amount of government securities that it might purchase during the months ahead, or if it indicates that it will purchase a lesser amount of those securities than current stock-market participants expect, there’s a good chance that stocks will fall sharply during the week ending Nov. 5.

I therefore urge you to not get too excited about the recent advances in stock prices.

Note from Moneynews:

If you’d like to learn about Mr. Frazier’s analysis of important economic and geopolitical factors and how to profit during different types of investment environments, try a free sample of David’s investment-advisory service, The ETF Strategist. The service helped investors generate a 35.8 percent investment return since its inaugural edition on Sept. 18, 2007, through Aug. 31 of this year. In comparison, the S&P 500 Index lost 24 percent of its value during that same period.  Click Here to Find Out More.

About the Author: David Frazier
David Frazier is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He also writes two very successful investment newsletters. Discover more by Clicking Here Now.

© 2017 Newsmax Finance. All rights reserved.

1Like our page
2Share
DavidFrazier
Seven days from now, Americans across the country will elect government officials to represent them in the U.S. Congress and in their respective states. The following day, the Federal Reserve will issue its latest statement regarding the Fed s monetary-policy plans for the...
david,frazier,election,stocks,fed
414
2010-19-26
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved