When bad news is good, at least for the market

Markets often work in strange ways and a lot of the time it is pointless trying to be rational or apply logic to their behaviour, because they turn the news to suit their sentiment and hopes. Yesterday was a good example of this.  After a month or so of fears that QE tapering by the Fed and possibly other Central Banks was on the agenda, markets had been falling, yet there was clearly something wrong here.  After all, tapering, which would be data dependent, was only likely to happen if the economy was in recovery mode. In other words, isn't a recovering economy supposed to be good for stock market quoted companies, surely that's what they want? A recovery?

Yesterday however, was another example of this strange market sentiment. The US GDP numbers came in lower than expected and markets went up. Sure, a bounce was due, but they went up because this "bad news" is actually good for what the markets seem to want - more QE.

The advances followed an upbeat finish on Wall Street overnight after U.S. first-quarter GDP growth was revised down to 1.8%, from an earlier estimate of 2.4%.

“The concerns of the market that prompted a selloff in recent weeks appear to have subsided,” said CMC Markets sales trader Miguel Audencial.

“The first-quarter U.S. gross domestic product figures increased [by less] than forecast, which the market read as a signal that the U.S. Fed is likely to step on the brakes at a later date than previously feared,” Audencial said.

http://www.marketwatch.com/story/korean-stocks-lead-asia-gains-amid-fed-hopes-2013-06-26

Sooner or later QE of this magnitude has to come to an end and perhaps we will see for possibly the first time in history economies recovering and bullish and stock markets crashing all over the world because the free money game of QE is coming to an end. Who knows, but don't try to apply logic to it.