The US economy may soon be able to take off the training wheels. When investors celebrated rather than mourned the Fed’s first, tentative step to cut its Quantitative Easing program, it was a sign that investors think growing strength can offset the impact of reduced Federal Reserve bond purchases. The WSJ reports:
Many analysts had expected stock investors to hunker down and sell on any Fed announcement of a so-called tapering in bond purchases. Instead, they concluded that Wednesday’s decision to pare stimulus “could be an example of the Fed moving because of improvements in the economy,” said Stephen Wood, chief market strategist at Russell Investments, which oversees more than $246 billion from its Seattle headquarters.
We will see how this works out, and there are many pitfalls still ahead, but an economy capable of growth without artificial stimulation would be something to celebrate.The dynamism of the American economy has been one of the wonders of the world since colonial times, and without the support of a strong US economy it is hard to see how the world as a whole can enjoy much prosperity or peace.