When I said I thought equities would cool after the Fed decision, I didn’t think they would drop over 2.5% the next day! This is the problem with August and why I was worried about a return of a “Flash Crash” due to low liquidity. Volumes are smaller and movements more extreme in usually a range. This time of year makes everyone nervous.
It’s interesting that the Fed’s actionswere interpreted in the way I was warning: what do you got left? In the theme of an uncertain world, the Fed has now just added more to it. On July 21st, Ben Bernanke spent most of his testimony to Congress describing how the Fed would exit the quantitative easing not expand it. How can the Fed pivot this quickly is underscoring Bernanke’s admission “unusually uncertain” economic outlook.