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Stocks Start Q3 on Upswing, but Headwinds Coming – CNBC

The first six months of 2013 have come and gone. Really flew by, didn’t it?

The first half of the year was not without its share of economic excitement. From a huge stock market rally kicking things off at the beginning of the year, to a nice big drop in stock prices the last month or so, it’s been quite the roller coaster ride. In this article, CNBC takes a closer look at where we are in the markets right now, and where we might be headed.

The biggest thing on every investor’s mind is the possible slowing down of the Federal Reserve’s “Quantitative Easing” program. Quantitative Easing (or QE) refers to the Fed’s purchasing of bonds and mortgages. They are currently doing this at a rate of $85 billion a month, the reason being that this pumps $85 billion dollars a month into our economy. Having more money in the economy increases people’s spending and investing habits, which makes our economy grow.

But this tactic can’t go on forever. It’s a bandaid fix. And no one is sure what will happen when the bandaid is taken off. Will the economy bleed?

That’s the main concern that led to the stock market’s drop in June. Ben Bernanke, the head of the Federal Reserve, indicated that they will slow down QE as the economy continues to strengthen. This causes concern for people who believe that the U.S. economy is too dependent on the help its getting from QE, and investors aren’t sure how to invest their money.

Ironically enough, the stock market is now reacting negatively to good economic data, because as the economy grows, so does the possibility of the Fed slowing down and eventually stopping QE.

Only time will tell what the long term effects of QE will be on the stock market and the economy as a whole. But for now, we’re keeping the bandaid on.

What do you think about the economic outlook for the next 6 months? Are we headed for good or rough times? Leave your answer in the comment section below!