The Flinchum File

Thoughtful Economic Analysis and Existential Opinions
Subscribe to the Flinchum File
View Archives

Begging For Sugar

Have you ever watched a kid’s face when asking him if he wants to go to the candy store?  His eyes get big, and his enthusiasm increases.  He even smiles.

That’s the reason the stock market has been rising lately.  While there has been no good news out of Europe, the flow of bad news has slowed.  Also, the economic data on jobs over the last two weeks has been disappointing, and investors know the Fed has two equal mandates:  low inflation and low unemployment.  Since inflation data remains tame, the Fed is free to stimulate the economy.

The Fed was meeting yesterday and again this morning.  An announcement will be released during lunch today.  The stock market is as excited as the kid heading to the candy store.  It is expecting something, maybe QE3 or a continuation of “Operation Twist” or Bernanke will show his creativity again.  If the Fed doesn’t give the stock market the expected candy this afternoon, I expect it will sell off.  It will pout like a kid.

The stock market is so primed to go up that it is grasping for good news . . . or a sugar hit.