Recap: Week Ending June 21, 2013

June 24, 2013

New MBA trading courses at the HIDC
New Undergraduate trading courses at the GTF

CNBC has already called it the sell off of the year, but this past week’s downside action is not anything the market has not seen before. This past Wednesday, Federal Reserve Chairman Ben Bernanke spoke outlining his plans for the upcoming months. Bernanke still remains unclear on the continuation of Quantitative Easing (QE), however, he describes the economy as improving greatly with unemployment set to hit new lows next year. Despite the positive news out from the Chairman, investors and traders feared the end of QE. Many believe that if QE was to stop the rally of 2013 may come to a complete stop. Serious profit taking as well as repositioning is occurring in the market. As QE continues the market is expected to continue its climb higher, however, in the short term uncertainty in market direction is expected as investors adjust for the long term. Bernanke again outlined his concerns about inflation, describing that it is not at the level he would like to see it at. As such comments were made; gold continued its push lower. Gold is a hedge against inflation as inflation is not rising as it is intended to gold bugs are now becoming bearish. With the ending of QE nearing, which naturally should create inflation, investors wonder will inflation levels ever reach previous levels. Once QE ends the printing of money and purchasing of bonds will end, shutting off another inflow of money into the US economy. Despite all this news, the fed left interest rates unchanged.

Economic news out of the UK was positive during the week with the consumer price index coming out above consensus. News out of the UK was quite for the rest of the week. Meanwhile, the consumer price index in the US edged up 30 basis points to 1.4% YoY for the month of May. This economic news somewhat contradicts news regarding deflation out of the Federal Reserve. It will be important to watch the consumer price index for the month of June which will be released in July.

Meanwhile despite recent positive news out of the Canadian economy the consumer price index fell below the contentious for the month of May. On with this economic news on Friday Canadian retail sales rose to 0.1% which is worse than the consensus, however, rose month over month.

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