From Cynthia Scot of OMC Financial Services:
Why the stock and bond markets liked the Federal Reserve’s announcement last week that it will continue its easy money policy.
**Ben Bernanke, head of the Federal Reserve, announced that it was going to continue low interest rates until at least 2015 to spur economic growth by purchasing mortgage-back bonds at the rate of $40 billion per month.
**The positive implications the markets anticipate are:
- Income investors will have to seek alternative investments in either bonds or dividend paying stock to boost their return.
- Home purchases will increase since mortgage rates will continue to be low.
- Auto dealers will be able to continue to offer 0% incentive programs to spur sales.
- Big purchase items for consumers will also have 0% incentive programs.
- Home owners may refinance their current mortgage and provide them with additional funds to pay down debt or have more discretionary income.
- Corporations will continue to borrow at low rates so that it may spur them to hire more employees
