Well it’s here. QE3 by the US Federal Reserve, an unlimited program that has buoyed markets that were already been in a bullish mood, which makes comparing this period to previous monetary stimulus very difficult. In the nadir of the GFC in March/April 2009, risk markets had been assaulted after crashing anywhere between 30-60%; after the end of QE 1 and 1.5 which saw most markets double or go up 50% or more, a large correction preceded QE2 in late 2010, before again sending markets soaring.
The recent “QEnthusiasm” has been quiet different, helped along by a now very accomodative European Central Bank but more likely, risk markets now have a fully built in expectation for QE to keep prices high. This evolution of markets is not healthy at all, but you can’t fight the tape.
In this week’s edition of Macro Investor, I wrote a series of “QEnthusiasm” trade articles on Friday straight after the announcement as entry signals clanged around the world. The core case remains – short USD and bonds, long everything unDollar. For an unlimited time though? Hmmm…
Chris Becker is an Investment Analyst at Macro Investor. To read the rest of this technical analysis, take up your free 21 day trial today.
