“On one hand, QE2 added to the U.S. market. On the other, a lot of the liquidity fled and went into emerging markets and commodities, and those commodities, including oil, went higher in price,” commented Ashish Shah, head of global credit at AllianceBernstein, reports Steven J. Johnson for Reuters. “So you actually robbed consumers of purchasing power.”
However, once QE2 ended, gold spiked, and equities took a dive as investors also sought the safety of Treasuries.
Michael Cheah, senior portfolio manager at SunAmerica Asset Management, believes that QE3 will be right around the corner if the economy takes another hit. The Fed has more room to inject money into the system, he thinks, with inflation and wage growth still depressed, although the U.S. inflation data this week was hotter than expected.
“I think quantitative easing is only creating the illusion of prosperity but my job is to trade that illusion,” Cheah remarked. “That makes me bullish stocks.”
Source: economicpicdata
Full disclosure: Tom Lydon’s clients own GLD.
Max Chen contributed to this article.