The speech Bernanke gives at this event has become an annual event in recent years while he has been the chairman of the Federal Reserve. Bernanke's speech has become extremely significant in the last two years as the stock market greatly reacts to what he says during these speeches. For example, based on researched gathered by USA Today, in 2010, leading up to Bernake's speech on August 26th, the S&P 500 stock market index was down 6.1% for the year, but after his speech, the index rose 20.1% for the rest of the year. A less "drastic" but significant change took place last year in 2011. Up until his speech on August 25th, the S&P 500 was down 7.8% for the year, but after the speech, the index rose 8.5% overall for the rest of the year. These statistics highlight how important Bernanke's speech is to the investors not only within the United States, but also around the world who look to the U.S. to lead the way during these difficult times.
Now, onto the meaning behind the words in Bernanke's speech. The key statement Bernanke gave during his speech was that "the stagnation of the labor market in particular a grave concern." This statement resonated throughout the speech as he proceeded to let the world know that the Federal Reserve is prepared to step in and do whatever it takes to stimulate the economy. However, he did not say exactly what the Fed is going to do or when they are going to step in. I think Bernanke and the Federal Reserve is going to wait it out a bit longer and see if things start to drastically improve over the next few months.
As of right now, stocks have responded well to Bernanke's speech. However, the latest economic data have still been pretty mixed as the job growth has been pretty slow and consumer confidence shifting month to month. This coming week will be a major week for stocks as the Federal Reserve Board meets to decide whether or not to take action based on the various economic reports that have been released since Bernanke's speech. Based on everything that has happened so far, I strongly believe that whatever the Federal Reserve decides to do, it will have a huge impact on the stock market. I hope that the Fed does decide to step in to try and stimulate the economy because the recovery effort so far has been painfully slow and somewhat inconsistent. If the Federal Reserve does indeed step in, I think that could be a major step towards getting the economy back on track. Let's hope for the best!
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