Try to Quell the Nerves

 | Sep 18, 2013 | 10:58 AM EDT  | Comments
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Will the market freak out when the Fed releases its statement this afternoon, like it did in June? Certainly the market has been nervous going into this event. Anything other than a $10 billion reduction in in bond buying is going to be seen by some as a big calamity and a reason for a market selloff.

And keep in mind that the strong reaction of the market to the June Fed statement and press conference wasn't just a one-day event. It went on for the better part of a couple of weeks.

On Tuesday, Wall Street Journal reporter Jon Hilsenrath went on CNBC's "Fast Money" to discuss the Fed announcement. What I found most interesting was that he said that they didn't want the markets to be upset like they were following the June statement.

I think that's right. I think this is just like what happened going into the Facebook (FB) lock-up expiration, which happened last November.

Going into that event, a majority view (including by me) was that this event was going to trigger a big drop in that stock because of the excess supply hitting the market. However, this event was so well telegraphed that just the opposite happened.

When the lock-up expiration came and went, investors instead treated the news as a relief and started to look ahead for Facebook's pricing of its stock relative to its future value. Instead of selling, they decided it was time to look ahead and buy.

It wouldn't surprise me if we see a similar dynamic here later today and in the coming day with stocks in general. Now, I'm not saying the stock market is as beaten down in price as Facebook's stock was last November. However, I still believe we are heading into a strong close to the year for stocks. We've gotten past the Fed statement after today and we also got past the "threat" of Larry Summers taking over as head of the Fed earlier this week.

There is still a chance the market could get upset by a debt ceiling threat to the U.S. government in the coming weeks or from some macro problems in China. However, rather than over-focus on these possible risks, I think the majority of the market players will start to focus on the continued gradual recovery of the U.S. economy and the strong results that we're likely to see from the fourth-quarter results for many stocks.

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