by Michael Tarsala
QE3 could come as soon as next month, if you read the tea leaves of this week’s FOMC minutes.
I’m not the only one who thinks so: Bill Gross, manager of the world’s largest bond fund tweeted following the minutes that he now sees further Fed easing as an 80% probability.
There were three key sentences in the statement that to me, said that the majority of voting members are now ready to enact more stimulus sooner versus later:
- Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery.
- While most members did not view the medium-run economic outlook as having changed significantly since the June meeting, several noted that they had lowered their expectations for economic growth over the coming quarters.
- With respect to the statement to be released following the meeting, members agreed that it should acknowledge the deceleration in economic activity, the small gains in employment, and the slowing in inflation reflected in the economic data over the intermeeting period.
Time marches on, and mind you, these are minutes from the August 1 meeting. We’ve started to see some better economic reports relative to expectations since then, which could sway the opinions of some on the 12 member voting committee.
Still, easing looks like it could be on the way.
The only bad news for investors is that QE3 may already be almost fully priced into the markets, meaning there could few stock market benefits.
If you want to talk about how potential market events including QE3, the fiscal cliff, or the presidential election might affect your equity portfolio, and perhaps talk about whether some of our defensive-minded investment strategies might be right for you, call Covestor at 866-825-3005 X 703 from Monday to Friday, 9 to 5 Eastern.
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It’s your own account; you can see the balance change on a daily basis, make investment changes extremely quickly, and add to or pull your money at your complete discretion.
Photo by: yomanimus
