The Markets

Baseball great Yogi Berra once said, “In theory there is no difference between theory and practice. In practice there is.” He may have been on to something.

Last May, Fed Chairman Ben Bernanke introduced the idea the Fed’s economic stimulus program, known as Quantitative Easing (QE), might be ratcheted down sooner rather than later. The concept, that easy money – the Fed has injected about $2.75 trillion into financial markets during the past five years – could soon be behind us, threw global markets into a tizzy.

Expectations that interest rates in more developed economies would move higher as QE tapered off caused investors to pull money from emerging markets (where many had sought higher returns). This created challenges in emerging countries with large current account deficits (deficits that occur when total imports exceed total exports, making a country a debtor nation).

So, what will happen when the Fed actually begins to buy fewer bonds? Pundits are mixed in their opinions. Some believe markets may become more volatile; others believe markets have already factored in the effects of tapering. In August, the Financial Times described it this way:

“The beginning of the end for QE matters greatly as for the past five years central banks led by the Fed have actively encouraged investors to pile into risky assets. With QE suppressing interest rates and more importantly, the volatility of prices, investors duly obliged and sought risky assets. Now with the Fed thinking about reversing some support, this summer’s turmoil may be a taste of what is coming in the form of higher long-term bond yields and market volatility. Some will argue the Fed’s taper is pretty much reflected by the sharp rise we have seen in long-term Treasury yields since May.”

We’ll know more when the Federal Open Market Committee announcement is made. Over time, however, it may not be all that easy to quantify the effects of more accommodative monetary policy in the United States, if that’s what the Fed chooses to do this week. There are other flashpoints that could affect markets, as well, including economic stressors in emerging markets, decisions on Syria, and upcoming Washington budget battles.

Data as of 9/13/13







Standard & Poor’s 500 (Domestic Stocks)







10-year Treasury Note (Yield Only)







Gold (per ounce)







DJ-UBS Commodity Index







DJ Equity All REIT TR Index







Notes: S&P 500, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance, Barron’s,, London Bullion Market Association. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

Best regards,

Jonathan K. DeYoe

P.S.  Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added. This newsletter was prepared by Peak Advisor Alliance.  Peak Advisor Alliance is not affiliated with the named broker/dealer. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices.  The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market. Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association. The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998. The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones. Yahoo! Finance is the source for any reference to the performance of an index between two specific periods. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. You cannot invest directly in an index. Consult your financial professional before making any investment decision.

Sources: (Go to this link if you are not able to read the Financial Times article:

(Go to this link if you are not able to read the Financial Times article: