The Fed’s surprise decision on Wednesday to continue its level of quantitative easing came as a surprise to experts like PIMCO CEO Mohamed El-Erian and others on the Street, many of whom had anticipated a $10 billion to $20 billion reduction in monthly stimulus.
The S&P 500 fell about 0.25% on Thursday after a late rally on Wednesday, and the decision also pushed up gold prices, which have improved about 5% in the past day or so.
Market watchers remain divided about the direction of stocks in the coming months, with Marc Faber (left), publisher of the Gloom, Boom & Doom Report, adding to his permabear credentials.
Faber, speaking on Bloomberg Television right after the Fed’s announcement on Wednesday, said: “The markets are overbought. The Feds have already lost control of the bond market. The question is when will it lose control of the stock market.”
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Faber says that his view of Janet Yellen, who may possibly replace Fed Chairman Ben Bernanke, as someone who will make the outgoing Fed leader “look like a hawk.” He also believes that current Fed policy is akin to “QE unlimited.”
Naturally, the Swiss investor’s outlook for the equity markets is quite negative.
“Well, the endgame is a total collapse, but from a higher diving board. The Fed will continue to print, and if the stock market goes down 10%, they will print even more. And they don’t know anything else to do,” he said in the interview. “And quite frankly, they have boxed themselves into a corner where they are now kind of desperate.”