Ever since the Fed has signaled the second coming of the QE policy, the market has been under great speculation. The speculation, however, is about to come to an end, it would be interesting to see how the stock market would fair under the normal market conditions.
Wednesday, November 3, 2010
QE2: Fed pulls the trigger
The Fed will be buying $600 billion, instead of the expected $500 billion, in LT Treasuries over the next 8 months through the quantitative easing policy. This will cause a higher than expected inflation which the market will rapidly adjust.
Ever since the Fed has signaled the second coming of the QE policy, the market has been under great speculation. The speculation, however, is about to come to an end, it would be interesting to see how the stock market would fair under the normal market conditions.
Ever since the Fed has signaled the second coming of the QE policy, the market has been under great speculation. The speculation, however, is about to come to an end, it would be interesting to see how the stock market would fair under the normal market conditions.
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2 comments:
The quantitative easing will probably do good for the U.S economy, but it could actually hurt the economies of other countries, especially emerging ones. Some emerging markets have started raising their interest rates. With the interest rate in the U.S being exceptionally low, investors around the world will flock to these emerging markets. With too much investments, those countries might be under risks.
I don't think it's obvious that the market will rapidly adjust to ward off inflationary pressure. Pumping $600 billion into the economy is no small feat. The $600 billion worth of bad assets would not have been purchased by market forces. Seeing as these purchases are not efficient, we could see high inflation rates in the not-too-distant future.
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