the fed taper and markets

The Fed has continued its policy to pull down its stimulus program, quantitative easing. And the markets across the globe react: here's one example.

The long-term-bonds-buying program, predominantly, was meant to bring down the long term interest rates. The short term rates are already lower, and the intention is to keep them lower. The result has been lower interest rates across different treasury maturities.

The goal was to see the growth in the economy. Whether that has been achieved depends upon how we see it. The indicators could be output, consumption, unemployment rate, markets or other elements. 

The GDP growth has been pretty decent:

The stock markets have gained:

The Fed therefore considers reducing the stimulus gradually, and the policy is showing up on those lines already.

Because of this the capital is supposedly flowing out of the global markets, and coming back to the US, and consequently, those markets are down.

I am not sure if it is justified for the global markets to go down. If the fundamentals of the economy of a country have changed, it is a reason for the revision of valuations. On the other hand, if the earning power, cash flows generating ability, the growth rate and risks therein have not changed significantly, the valuation should not change.

The fact that market prices have changed gives a reason for the investors to have a look at both markets in general and selective stocks in particular.

Let's check out if anything interests us.