Investors appeared to be spooked on Wednesday by the latest development in the Federal Reserve. Within minutes from the latest meeting of the Fed that showed that the US economy of improving steadily stock and bond prices fell over fears that a reduction in the stimulus program practiced by the Reserve to keep interest rates low could be expected in the ‘coming months’.
Investors must prepare themselves
Kristina Hooper, head of US investment strategies for Allianz Global Investors remarked that in the coming days ‘investors must be prepared to see the Fed wind down its program in the long term’.
While investors do understand that the Fed cutting back on its bond buying policy is an eventuality, they still remain very sensitive to concrete signals that a pullback is imminent. The investors’ major concern is that the Reserve might gradually slow down its stimulus program even before the economy is fully ready to function without support.
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