On Wednesday, when the Fed announced changes to its monetary policy, Wall Street and the US stock markets had reacted well.
In fact, the changes turned out to be completely in line with market expectations, so they did not generate uncertainty and found the markets ready.
Taking the S&P 500 and Dow Jones indices as a reference, on Wednesday the first one closed with +1.7% and the second with +1.2%. The Nasdaq reacted even better to the Fed’s statements, up 2.4%.
The next day, however, the enthusiasm seems to have faded.
Fed and tapering, Wall Street falls
In fact, a closer look at the Fed’s decisions reveals that the acceleration of tapering from January onwards will result in less fresh capital being injected into financial markets. In addition, the definitive end of monetary stimulus in March could also bring to an end the bull run that began back in April last year.
Yesterday the S&P 500 closed with a loss of 0.9%, returning to a level close to that before the Fed’s statements on Wednesday.
The Dow Jones held up a little better, with a broadly neutral day, while the Nasdaq was the worst performer, with a -2.6% loss that completely wiped out the previous day’s gains.
In other words, it was as if the US stock markets yesterday had cancelled out the positive effect of the Fed’s statements made the day before yesterday and were back to square one.
The price of gold
A significant datum to understand what is happening in these days could be the price of gold.
On Wednesday gold fell, albeit slightly, to below $1,760 an ounce. On Thursday it rose to almost $1,780, and today it has continued to rise to almost $1,810.
It is worth noting that the price of gold has now returned to the levels of 23 November, after three consecutive weeks in which it had not been so high.
This is still a much lower level than in June, for example, when it touched $1,920.
While gold went up, the dollar went down. Indeed, the Dollar Index peaked at almost 97 points before the Fed’s statements, and then quickly fell first to 96.3 on Wednesday evening, and then again yesterday to 95.8.
These signs could point to some sort of normalization of the US financial market after the hangover from more than a year and a half of massive monetary stimulus. However, for now they do not seem to be giving any signs of concern in the short term.