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U.S. Preliminary GDP, Unemployment Claims, and Syria, and How the Markets Will React.

The Dow and S&P 500 are both up today as there seems to be a delay in action on behalf of the United States. In addition preliminary GDP numbers were released today and the economy grew 2.5% in the second quarter beating expectations of 2.2% and up from 1.1% growth in the first quarter. Unemployment claims were higher than expected, a total of 331 thousand up from the expected 330 thousand. (Not that great)

These numbers are a good indication for economic growth and signals that the U.S. economy is continuing to improve at a modest pace. However, good news about the economy is bad news for the markets. Why? It may signal an end to to the QE program which most people to have been putting upward pressure on the markets.  

But will it really have as bad of an impact on the markets as investors are fearing? Here is what I think will happen:

1. The fed will being to ease the stimulus program slowly in a way that would not have a major impact on the real economy. So mortgage rates and interest rates would not skyrocket, but they will increase gradually. The fed knows what its doing.

2. The markets will react, but not as much as people think it will. The markets knows that the fed is planning on ending the stimulus and it has been pricing this in for the past few months. When word comes of a reduction, markets will drop for a few days (maybe) but other investors would realize that ending the stimulus is a good thing, it means the economy can finally support itself, and they will begin to buy in.

3. Over time the market will begin to regenerate the loss parts, so to speak, because of good economic data (assuming that good economic data will come).

Disclaimer: This is just my opinion.

Do you agree or do you have another suggestion?