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Understanding The Market Sell On Strong GDP Numbers



July 30, 2014 – Comments (0)

The GDP (gross domestic product), a measure of economic growth, came in at a very strong 4%growth today. This number initially spiked the markets sharply higher, yet since the open, the markets have fallen and gone negative. Why did this happen? Just like most answers, it all comesback to the Federal Reserve. The markets are anticipating that the stronger than expected GDP number will force the Federal Reserve to curb their stimulus faster and raise interest rates quicker.The markets are very addicted to the money printing done by the Fed and low interest rates. In fact,it has been argued very strongly that the Federal Reserve stimulus known as quantitative easing has resulted in a market bubble by artificially keeping interest rates low. Should interest rates start to head higher, the bubble may burst.



The Federal Reserve can save the markets later today by soothing fears of higher interest rates when they announce their FOMC Statement at 2PM ET. Will they save the day once again? Stay tuned...


Gareth Soloway

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