The QE conundrum, when will it end? Not anytime soon.

Current market sentiment has in part turned negative because of an interpretation of the last US Fed statement that seemed to suggest that QE would be tapered down at some stage in the months to come. Bernanke's statement was actually somewhat vague and didn't really say anything that should come as a surprise to the market.

From May 22;

...markets have focused on one thing he said in the Q&A session where he was asked directly whether the Fed could make a decision to wind down its bond-buying program before Labor Day. Bernanke’s response that the Fed could change course “in the next few [FOMC] meetings” depending on prevailing economic data caught markets a bit off-guard, and seemingly leaves a door open for some Fed tapering sooner than Bernanke’s prepared testimony would have indicated.

http://blogs.barrons.com/incomeinvesting/2013/05/22/bernanke-doesnt-rule-out-fed-taper-in-the-next-few-months/

Since then the markets have been falling fairly steadily, even on a Tuesday where after 20 consecutive up days, yesterday was negative in the US. So far there hasn't been that much damage to US markets by Bernanke's comments and in one sense, why would there be? The key words from the Fed are likely to be "depending on prevailing economic data", which is basically saying the same thing as before.

At some stage markets are going to have to find a way of doing business without QE, but until that happens, sell offs like the one in the last week or so are arguably not happening because of the fear of QE ending, that is merely the excuse. Surely those in the market know better than that?

If and when QE does end the most likely option taken by the Fed and other Central Banks will be a gradual winding down if and when economic recovery is supposedly under way and not until then. It is this balancing act that will probably be difficult to time because who really knows when that will be. Chances are the Central Banks don't know, but having started the game of QE they are the ones that have to live with it.

Interesting that markets are down a little today in part because US job numbers came in lower than expected.

U.S. stocks declined on Wednesday, extending losses into a second day, as data found U.S. private-sector job growth and productivity below expectations. 

“More attention is being brought to the economic data, so everyone can play Nostradamus and guess what the Fed’s next move will be,” Mark Luschini, chief investment strategist at Janney Montgomery Scott, said of ongoing guessing as to when the Federal Reserve would begin tapering its $85 billion in monthly bond purchases.

http://www.marketwatch.com/story/us-stocks-extend-drop-into-second-day-2013-06-05

But hold on, surely the next move by the Fed after relatively weak numbers like this is fairly predictable? Chances are there will be no tapering and no change while the data is as up and down, some good, some bad, as it seems to be and you don't need to be Nostradamus to see that.