Tags: Penn | Fed | Economy | easing

Penn Financial CEO: Investors Confident Fed Will Act to Boost Economy

Thursday, 12 Jul 2012 08:08 AM

By Nancy Stanley

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Although the market fell more than 100 points after the release of the minutes from June’s Federal Reserve Open Market Committee meeting, investors appear to be confident that the Fed might step in to boost the economy, Matt McCall, chief executive officer of Penn Financial Group, told Fox Business.

The minutes showed the Fed officials expressing concern about the struggling economy and signaling that it could get worse if Congress fails to prevent tax hikes and spending cuts by the end of the year, The Associated Press reported.

“It's everything that we already know. We know the economy slowing down,” McCall said. “They let us know that the unemployment rate has been elevated. Get the heck out! Unemployment’s really not that good?”

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

The minutes also revealed that the Fed would do something only if things get worse.

“It's almost as if when bad news comes out, we see the market actually do a little better at the end of the day because people are realizing the worse things get, maybe the Fed's going be that backstop for us again and lower interest rates,” he noted, adding that the Fed can’t really lower interest rates any more, but instead will buy bonds and launch the third round of quantitative easing (QE3).

“Wall Street wants free markets and long term I want free markets too,” McCall stated. “But for my investors that are in the market, and me myself being in the market, if we get QE3, if we get another round of quantitative easing, we know darn well it puts the stock market higher.”

The market rallied approximately 20 to 25 percent in six months after the last two rounds of QE.

“So again you're going assume that if [QE3] happens, the stocks take off, rally into an election and rally into the end of the year. The market, as investors, we want that,” he said.

“But at the same time we’re talking out the other side of our mouth and saying ‘Government stay away. Don't mess with us,’” he added.

In addition, McCall said, investors are confident that the fiscal cliff will not happen.

“I think a lot of people are you're assuming that when push comes to shove something will be figured out in Washington,” he noted. “Maybe they extend the tax cuts and they won't raise a tax on dividends. Or Obamacare won’t really affect it as much they thought.”

According to McCall, investors are optimistic as far as the fiscal cliff is concerned and “they're going to close their eyes and just follow QE3.”

But if the fiscal cliff happens, he said, “the market gets crushed. I mean it wouldn't be priced in at all.”

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

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