The U.S. markets were up on Friday and followed by a rise in Asia and European markets on Monday. Why? Because the economic indicators are bad enough to cause traders to expect another of quantitative easing by the Fed (a.k.a QE3) and other central banks. Since quantitative easing creates more liquidity and lowers interest rates, risk assets such as stocks and commodities increase in price. Thus, the stock market rises due to quantitative easing.
In 2012, it seems that the market has been anticipating quantitative easing by the central banks and the stock market has been rising most of the year, with a brief pullback in May 2012. With the economic news getting worse throughout the summer, the markets have been rising with the expectation of imminent quantitative easing.
At this point, I am still skeptical of a longer term rally. I will try to profit in the short term by keeping our materials stocks and exercising some options in my company's stock. In addition, I will sell some gold jewelry if spot gold prices exceed $1800. However, if the stock market advances sharply or continues to rise into October, I will consider putting about 10% of our cash back into the market.
For more on Strategies and Plans, check back every Monday for a new segment.
This is not financial or investing advice. Please consult a professional advisor.
Copyright © 2012 Achievement Catalyst, LLC
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1 comment:
I am wondering when, if ever, the stimulus junkie that the stock market has become will ever be forced to go 'cold turkey, and what will be the consequences.
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