{"id":696,"date":"2011-06-12T10:34:22","date_gmt":"2011-06-12T09:34:22","guid":{"rendered":"http:\/\/www.penguino.co.uk\/?p=696"},"modified":"2011-06-15T07:05:35","modified_gmt":"2011-06-15T06:05:35","slug":"dow-jones-industrial-average-qe2-sunset","status":"publish","type":"post","link":"http:\/\/www.penguino.co.uk\/finance\/dow-jones-industrial-average-qe2-sunset","title":{"rendered":"Dow Jones Industrial Average – QE2 Sunset"},"content":{"rendered":"\n\n\r\n\n\n\n

\"Dow<\/a><\/p>\n

 <\/p>\n

Dow Jones Industrial Average fell from the height of 12,876 since May, in its sixth consecutive week, down to 11,951 on 10 June 2011 – its worst streak since 2002<\/a>.<\/p>\n

Economist\u00a0Martin Feldstein<\/a> argues that the expected 2nd<\/sup> Quantitative Easing (QE2), hinted by Ben Bernanke in August 2010 and announced on the 3rd<\/sup> Nov 2010, led to a rally in the financial market which in turn contributed to increasing consumption and the strong performance of the US economy in late-2010.<\/p>\n

<\/p>\n

QE2 has been responsible for a dramatic stock market gain thanks to the Fed, putting the impact at 4,000 Dow points since it started intervening, and 250 points of the S&P 500 rally since late August 2010 – Nomura Securities\u2019 Bob Janjua estimated.<\/p>\n

For some observers, the objectives of QE2 have been met when measured by the lower yields on long-term US Treasuries, the easing of lending conditions and a rise in inflation expectations.<\/p>\n

Mr Bernanke said recently<\/strong><\/a> that<\/p>\n

\u201cWe have seen increased evidence that a self-sustaining recovery in consumer and business spending may be taking hold.<\/em>\u201d<\/p><\/blockquote>\n

Participants at the Reuters 2011 Investment Summit said a QE3 was unlikely because the US economy was showing signs of growth despite a slew of weaker economic numbers, and the US economy could stand on its own, a Reuters report<\/a> from Thursday showed.<\/p>\n

The question is how will the US and UK equity markets respond in the face of higher unemployment, soaring public debt level and a weak housing market \u2013 which is a continual trend that economists say may last for a few more years.<\/p>\n

With the current international backdrops of the Middle East political tension affecting Oil prices<\/a>, China\u2019s rigorous tightening of their money policy<\/a>, and the contagious European Sovereign\u00a0Debt Crisis, growth is hampered in short to medium terms.<\/p>\n

During QE2 – There was little risk to borrowing (and deploy that capital into the stock market or commodities) as it was clear that the\u00a0Fed<\/a> and the Bank of England was putting the interest rates in-check. With that risk-guarantee now off the table, shrew investments will move the \u201cfast earned money\u201d<\/a> to new opportunities.<\/p>\n

QE2 is scheduled to complete at the end of June. A repeated QE implementation is merely a partial, monolithic approach to the current economic predicaments. It is not a solution and could undermine and limit the scope of future exit strategies.<\/p>\n

Put it simply – how do you end it?<\/p>\n

 <\/p>\n\n\n\r\n\n\n\n","protected":false},"excerpt":{"rendered":"

  Dow Jones Industrial Average fell from the height of 12,876 since May, in its sixth consecutive week, down to 11,951 on 10 June 2011 – its worst streak since 2002. Economist\u00a0Martin Feldstein argues that the expected 2nd Quantitative Easing (QE2), hinted by Ben Bernanke in August 2010 and announced on the 3rd Nov 2010, […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_s2mail":"","ngg_post_thumbnail":0},"categories":[5,10],"tags":[262,264,266,265,268,258,259,260,257,267,261,263],"_links":{"self":[{"href":"http:\/\/www.penguino.co.uk\/wp-json\/wp\/v2\/posts\/696"}],"collection":[{"href":"http:\/\/www.penguino.co.uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.penguino.co.uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.penguino.co.uk\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/www.penguino.co.uk\/wp-json\/wp\/v2\/comments?post=696"}],"version-history":[{"count":0,"href":"http:\/\/www.penguino.co.uk\/wp-json\/wp\/v2\/posts\/696\/revisions"}],"wp:attachment":[{"href":"http:\/\/www.penguino.co.uk\/wp-json\/wp\/v2\/media?parent=696"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.penguino.co.uk\/wp-json\/wp\/v2\/categories?post=696"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.penguino.co.uk\/wp-json\/wp\/v2\/tags?post=696"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}