Forget the Fed Mins., More Action Depends on Jobs & Unemployment

http://www.forbes.com/sites/afontevecchia/2012/08/22/forget-the-fed-minutes-qe3-depends-on-the-unemployment-rate/

Roberts understands that U.S. equities have been stuck in a 10% trading range as a direct consequence of Fed action. When stocks fall to the bottom of that range, “we get a touchy, feely, dovish Bernanke” who props them up with the siren calls of liquidity.

The minutes released on Wednesday recorded the FOMC discussions heard at the July 31/August 1 meeting, which initially disappointed markets but gave way to a further leg up in the rally that has extended since June. The FOMC appeared particularly supportive of QE3, with “many members [judging] that additional monetary stimulus would likely be warranted fairly soon” unless the economic recovery strengthened.

Given the Fed’s dual mandate, and subdued inflation, the minutes revealed that the Fed will be closely monitoring the coming jobs report, scheduled for September 7. Roberts suggests the unemployment rate “will be key,” and suggests “looking for outliers.” If there is a substantial move, say a “0.2 or 0.3 percentage point change in the unemployment rate,” then investors should expect Bernanke & Co. to pull some moves.