Salient to Investors:

Jeremy Siegel at Wharton said:

  • The start of tapering in September is already baked into bond and stocks prices and won’t stop stocks rising to between Dow 16,000 and 17,000 by year-end and 17,000 or more in 2014 as long as earnings continue to beat expectations at the rate they did in Q2, 2013.
  • Q2 GDP growth will be very weak but Q3 will be 2.5% to 3% as long as jobs remain in the 150,000 to 180,000 range.
  • There have always been disagreements at the FOMC. Bernanke is on the dovish side.
  • We already have over $1.5 trillion of excess reserves which is not being lent out so do we need to add much more?

Adrian Miller at GMP Securities said Q4 will see the start of tapering, and says Q3 GDP is looking good and the economy will pick up in half2.

Mohammed El -Erien at Pimco said Bernanke is giving different signals to perform a very delicate high wire act between the market getting carried away with risk taking and the risk of disrupting the fragile recovery.

Carl Riccadonna at Deutsche Bank said September tapering is hanging by a thread since Bernanke was very dovish. Riccadonna said the Fed is allowing the hawks the leeway to get excited about ending QE but if Q2 GDP is soft then Bernanke will wait to pull trigger.

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