Benjamin Graham once said that markets are voting machines in the short-term and weighing machines in the long-term — sentiment vs fundamentals. These days, the primary driver of sentiment tends to be central bank statements and actions — with mere statements having huge impact.
If you have doubts about the market impact of central-bank-speak, just take a gander at this calendar of central bank statements compared to market price action:
US Stocks
European StocksJapanese StocksChinese Stocks
Bernanke frightened the markets, and other central banks stepped in with voice and cash to stem the decline, followed by a dovish “clarification” by Bernanke yesterday. It appears that all is well for now, at least as far as central bank driven sentiment is concerned.
If you have doubts about the market impact of central-bank-speak, just take a gander at this calendar of central bank statements compared to market price action:
- 05/22 Federal Reserve president Ben Bernanke said that a tapering of quantitative easing could begin later this year if conditions warrant
- 06/18 European Central Bank president Mario Draghi said he had an open mind to doing what was necessary
- 06/19 Bank of Japan president Haruhiko Kuroda said they are taking steps and felt things would work out
- 06/20 Peoples Bank of China governor Zhou Xiaochuan added liquidity to their banking system to relieve a liquidity crunch
- 06/21 St. Louis Fed president James Bullard said QE could actually be increased if inflation slows
- 07/10 Federal Reserve president Ben Bernanke said the economy needs the Fed’s easy-money policy “for the foreseeable future.”
US Stocks
European StocksJapanese StocksChinese Stocks
Bernanke frightened the markets, and other central banks stepped in with voice and cash to stem the decline, followed by a dovish “clarification” by Bernanke yesterday. It appears that all is well for now, at least as far as central bank driven sentiment is concerned.