Jackson Hole Still Makes Noise Without Bernanke

It’s not what you look at that matters; it’s what you see.”  –  Henry David Thoreau

Wall Street had its ear close to the ground towards the end of last week, listening closely to the chatter emanating out of the Fed-sponsored 2013 Jackson Hole Economic Policy Symposium.

One sound they surely didn’t hear was the mellifluous musings of soon-to-be-out-the-door Federal Reserve Chairman Ben Bernanke, who chose not to attend for the first time since his inaugural year way back in 2006.

It is probably a safe assumption that Bernanke’s name did get bandied about at the conference attendees, including many of the world’s central bankers and officers.

According to the mainstream financial media, much of the chatter revolved around the question of who would be replacing Bernanke, current Fed Vice-Chair Janet Yellen or former Obama advisor Larry Summers.

As far as investors are concerned, it may end up not mattering too much as to whether it’s Summers or Yellen that gets the ultimate nod from Obama.

Any big differences would have to do more with style over substance, as both Yellen and Summers would probably stay the course that Bernanke has set. The primary difference might end up having to do more with speed of implementation of policy adjustments, in terms of both tapering the current version of QE3 and any subsequent rising of interest rates.

So beyond the curiosity factor regarding who’s up next for the Fed-head job, the more relevant issue to investors would be, “When is the Fed tapering going to begin, and when will it end?”

This is probably the question that is receiving the most play up in Jackson Hole, followed closely by “What happens when the tapering does go into effect?”

Obviously, the market, as well as the economy, will be impacted in a big way should the billions that the Fed has been injecting into the economy cease to be injected.

The curtailment of the current, massive bond-buying program known as QE3, which started at a mere $40 billion per month just one year ago and has now grown to $85 billion per month, will surely drive a large number of investors back to the sidelines, as the economy remains wobbly and might contract without the largess of the Fed.

In addition, other central banks might follow the Fed’s lead, and we could see the more recent stimulus measures of the European Central Bank follow the path of curtailing the loose money.

Whether the pulling of the stimulus plug is a good idea at this point is certainly arguable. And, to be sure, it probably was the focus of some juicy arguments at the Symposium.

Whether any consensus comes out of the event remains to be seen. But at this point, it seems the die is cast for the tapering of the stimulus program, as dictated by Bernanke a few months back. How big an impact the tapering ends up having on the market will depend on the rate of the tapering.

And, in a chicken-and-egg sort of scenario, the degree of tapering will be dependent, to a large degree, on the economic data that will be reported during the first few weeks of September, the time period that the first round of tapering has been indicated to start.

That is, if you can find a consensus among the multiple statements from the various officers of the Fed over the last several days.

What the Periscope Sees

The Sabrient SectorCast ETF Rankings rate each of the ten U.S. industrial sector iShares (ETFs) by Sabrient’s proprietary Outlook Score and are revised on a weekly basis.

For the fourth consecutive week, Technology Sector led the SectorCast rankings. The Tech Sector’s Outlook Score sat at a strong 92. Next up was the Financial Sector, which was second at 81. The Consumer Goods Sector completed the top tier with a score of 73.

Here is the current list of some of the top-performing Technology Sector ETFs year-to-date, as of the end of the fourth week in August:

FDN — First Trust Dow Jones Internet Index Fund, +28.71%

SOXX — iShares PHLX SOX Semiconductor Sector Index Fund, +21.39%

FXL — First Trust Technology AlphaDEX Fund, +20.71%

QTEC — First Trust NASDAQ-100 Technology Sector Index Fund, +20.39%

IGV — iShares S&P GSTI Software Index Fund, +17.74%

SMH — Market Vectors Semiconductor ETF, +16.27%

 

ETF Periscope

Full disclosure:  The author does not personally hold any of the ETFs mentioned in this week’s “What the Periscope Sees.”

Disclaimer: This newsletter is published solely for informational purposes and is not to be construed as advice or a recommendation to specific individuals. Individuals should take into account their personal financial circumstances in acting on any rankings or stock selections provided by Daniel Sckolnik  or Sabrient. Neither Daniel Sckolnik not Sabrient makes any representations that the techniques used in its rankings or selections will result in or guarantee profits in trading. Trading involves risk, including possible loss of principal and other losses, and past performance is no indication of future results.