The Federal Reserve Board on Wednesday said it will formally begin to sell some $4.5 trillion in bonds which it purchased as part of the 'Quantitative Easing' effort to end the Great Recession, and recalibrated its plan for interest rate increases over the coming two years, moves applauded by prominent local financial analyst Liz Crawford, News Radio 1200 WOAI reports.
"As long as company earnings are strong and our economy continues to grow, we can warrant that," said Crawford, who is the newly named CEO of San Antonio's Sendero Wealth Managment.
She says the U.S. market is so strong, and the strong dollar and robust economic growth make U.S. bonds so attractive to foreign buyers, that the average U.S. investor probably won't even notice the appearance of the mortgage backed securities on the market.
"Foreign funds have continued to buy up any bonds they can in this market, and I think that's going to continue," she said.
Crawford added that she also expects insurance companies, which have suffered major casualty losses from the string of natural disasters in the past month, will also be aggressive buyers of the bonds, to recalibrate their losses.
She discounts worries that the bonds will musclue out equities as the major purchasing vehicle of the buyers who have driven the stock market to record highs over the past several sessions. The Dow opens today at an all time high of 22,412, up nearly 42 points after the Fed announcement.
Crawford says the Fed's guidance on interest rates, though a little varied from previous expectations, will also provide the markets with a path moving forward.
"12 out of 16 of the voters in the Feds are looking for another rate hike this year," she said. "And they are clearly broadcasting that they expect another three more in 2018."
She says higher interest rates are a sign of the strength of the current bull run, and a vote of confidence that the strong corporate earnings, employment growth, and stock market performance will continue.