Antonio Fatas writes
What will we learn the day Ben Bernanke announces that we are starting that path towards normalization? It might be that we simply learn that he is becoming optimistic about growth in the US. This will be good news. [skip] this has to be good news.
There is a second and more pessimistic scenario: the day Ben Bernanke announces that QE is ending we learn that the economy is not doing much better but that the FOMC has simply changed their mind.
[skip] what matters is how the stock market will read the communications of the central bank. The words chosen to communicate their actions at that point ... will make a great difference.
I can't comment there. I comment here. First I don't see why it has to be good news that Bernanke is optimistic. It isn't as if traders have such deep respect for his judgment (I do but I have never bought a share of stock). But more how can Fatas know that the words chosen by the FOMC will make a great difference. The QEIII and QEIV announcements don't seem to have made a great difference (the S&P 500 index went in opposite directions on the two days if I eyeball FRED graphs correctly).
Also see the post below. Fatas is assuming that traders understand that QE is not pumping up share prices aside from it's effect on future GDP growth and such like. But many are sure that QE is pumping up share prices somehow. The assumption is that people don't believe something which makes no sense to Fatas even though they claim to believe it. I don't think that is a good assumption.