The aging bull has turned into a raging bull so far this year. The S&P 500 is up 18.6% year to date, well ahead of last year’s 13.4% gain. Not bad for a bull that has been charging forward with only a few stumbles since March 2009. It hasn’t stumbled this year. There has been only one mini-correction, with the S&P 500 down 5.8% from May 21 through June 24.
Fears that the current bull market (2009-?) might be tracking the previous one (2003-2007) have abated as stock prices rose to new highs this year, surpassing the previous peak on Oct. 9, 2007, rather than starting a bear market, as they did after the market peaked on that day in 2007. However, the year isn’t over, and there are some hurdles that could trip the bull. More likely is that stock prices will move sideways for a while before resuming their climb to new highs in 2014. Nevertheless, let’s look at the upcoming challenges, starting with the Fed.
The Federal Open Market Committee meets Tuesday and Wednesday. Odds are that the statement released after the meeting will signal the Fed will start to phase out QE following the next meeting, scheduled for Sept. 17-18. To minimize adverse market reactions, the statement is likely to ease “forward guidance” some more. I wouldn't be surprised if the 6.5% threshold for the unemployment rate is lowered to 5.5%.
Source: Ed Yardeni — Ed Yardeni is the president and chief investment strategist of Yardeni Research Inc., a provider of independent investment strategy and economics research for institutional investors.
