Investors are torn between hope the U.S. will confirm economic recovery and the fear of questioning the program of asset purchase by the Federal Reserve, and are likely to remain on the defensive during next week. Stating that the Fed may decide to reduce its program of asset purchases at the next meeting of the Monetary Policy Committee, Ben Bernanke caused a decline in equity markets and a rising in bond yields.
Friday, equity markets have completed a second consecutive week of decline, mainly because operators fear that future employment figures for May, which will be published this week, justify a tightening of monetary policy by the Fed.
“We’re in a mindset where the market seems to be very fearful of the Fed beginning a tapering,” said Quincy Krosby, market strategist at Prudential Financial in Newark, NJ. “Those who are in the market based on easy money will probably exit” if the employment figures may be better than expected, Quincy Krosby added.
Mark Luschini, chief market strategist at Janney Montgomery Scott in Philadelphia, said that better than expected employment figures continue to fuel concerns that have arisen in the markets in recent days.
According to a number of economists, unemployment will not decrease significantly as the numbers of new jobs have not reached or surpassed the 200,000 job gains threshold for several months in a row. But the Federal Reserve pledged to keep rates at their current levels until the unemployment rate will drop below 6.5 percent.
The consensus of economists polled by Reuters suggests that 168,000 jobs were created last month, with an unemployment rate at 7.5%. In April, this figure stood at 165,000.
If the figures proved better than expected, the employment figures could certainly cause a decline in equity markets, but for the short-term, estimate the analysts who emphasize that improvement in the labor market will necessarily have positive consequences for the U.S. economy.
Fears observed in recent days have not really challenged the upward market trend. Since January 1, the S & P 500 was up 14.34%, a five-month performance not seen since 1997.
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