Investors in the US are about to be bitterly disappointed

Every year around this time, the world’s most powerful market movers gather in a US holiday resort and make their plans for the global economy.

I’m not talking about some conspiracy-theory-laden offshoot of the Bilderberg Group here. I’m talking about the annual central bankers’ shindig in Jackson Hole, Wyoming.

This Friday, Federal Reserve chief Ben Bernanke will be delivering his big speech.

Plenty of investors are holding their breath, hoping he’ll make some hint at injecting a load of new money into the US economy.

But I think they’re in for a big disappointment...

The Fed needs to keep its powder dry

The Federal Open Market Committee (FOMC) last met to discuss the state of the US economy at the start of this month. The minutes from that meeting came out last week, and got everyone very excited. That’s because the FOMC suggested that it might be ready to do more “fairly soon” unless the US economy improved.

By ‘more’, everyone assumes they mean more money printing. So they’re hoping that this Friday, Fed chief Ben Bernanke might give a hint about just how much more printing they plan to do.

But there are many reasons why anyone betting on a third batch ofquantitative easing (QE3) from the Fed this year might be disappointed.

There’s Europe, for starters. Plenty of tripwires lie ahead of the eurozone in the next month or so. There’s the German constitutional court’s decision on whether or not the eurozone’s big bail-out mechanism is legal or not. And there’s the usual to-ing and fro-ing over Greece’s financial situation.

Any nasty surprises on these fronts could send the markets into a spasm of panic. So it strikes me that the Fed will probably want to keep its powder dry, in case of emergencies.

Also, the Fed will want to keep the pressure up on Europe. If the European Central Bank (ECB) follows through on its promise to do “whatever it takes” to save the euro, more QE in the US may be unnecessary.

But if the US prints more money, it takes some of the pressure off the Europeans to get their act together.

http://www.moneyweek.com/investments/stock-markets/us/investors-in-the-us-are-about-to-be-bitterly-disappointed-60300