Fed Chairman Bernanke said the 7.6% unemployment rate is likely overstating the health of the labor market and that the 1.0% inflation rate is below the Fed’s 2.0% target. He added that both sides of the mandate are saying the Fed needs to be more accommodative and that “highly accommodative monetary policy for the foreseeable future is what’s needed in the US economy.” QE tapering in September seems less likely.
The Delta Market Sentiment indicator is in the low 60% range, bullish and rising. The concerns that were raised in the wake of the Fed’s June 19 comments have been erased. We recommend investors increase long exposure. During risk-on market phases, the NASDAQ and small cap stocks tend to outperform. Investors can gain exposure to these sectors using the ETFs QQQ and IWM.