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Investing Specialists

Markets Turn Pavlovian on Fed Cues

Fed easing and tightening expectations have been nearly perfect predictors of the stock and bond markets in the short run.


The market endured yet another week of Fed-watching as investors mindlessly moved markets upward when more quantitative easing looked possible, and downward when it looked like tapering of bond purchases was around the corner.

The reaction is almost like Pavlov's dogs responding strictly based on conditioning to past actions and not any type of reasoning. More easing means the economy is weak. Is that truly a good thing?

Robert Johnson, CFA does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.