Tuesday, December 10, 2013

Market Wrap-Up for Dec. 6 – Tune Out the Taper Talk

Here we go again: the financial media, various analysts, and all kinds of investors are once again obsessed with predicting when the Federal Reserve will begin to slow down its purchase of long-term Treasuries and mortgage-backed securities – a stimulus measure known as quantitative easing. Especially with strong economic data across the markets over the past two months (culminating with today’s seemingly strong November jobs report), many expect the Fed to scale back its monetary stimulus sooner rather than later. But for retail investors, attempting to speculate the future of the Fed’s stimulus in order to make some short-term gains will just lead to ultimately losing long-term investing decisions.

The supposed experts who make a living at trying to predict the Fed can’t even come to a consensus for when this taper will occur. Analysts at Goldman Sachs and Barclays are calling for the Fed to taper in March. Meanwhile, UBS and TD Securities expect the slowdown in stimulus to occur in January, and Deutsche Bank and other financial institutions say tapering will happen later this month. So, if these professional traders and investors aren’t on the same page, what makes retail investors think that they will be able to accurately trade around the Fed in an attempt to score some big, short-term gains? It’s a futile game that will end up being a drag on a portfolio over the long-term.

Predicting when the this tapering will occur seems like a staple of the financial media, which inevitably and unfortunately causes viewers and readers to worry about it as well. But as dividend investors should know, uncontrollable events like the Fed’s decisions and Washington’s dysfunction shouldn’t lead you to alter your investing strategy. If utilized well, a dividend investing strategy will be able to overcome any blips stemming from the Fed’s taper or other outside factors. As such, avoid trading around the markets in order to score big on pure stimulus speculation.

Today in the Markets

The Non-Farm Payrolls report for November was released this morning showing that the U.S. economy added 203,000 jobs, above estimates of 185,000. This increase in jobs also lowered the unemployment rate to 7.0%. Investors and traders took this news and ran with it, sending stocks rallying big on the day.

Among individual stocks that contributed to today’s rally were: Intel (INTC), Johnson & Johnson (JNJ), Rockwood Holdings (ROC

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