Ritholtz on QE2's Postscript

This is the stuff that everyone ought to be talking about right now…how will bonds be affected when QE2 winds down in June?  How about Ag commodities or the US Dollar?  What about gold?

Barry‘s midway through a three part series that focuses on exactly these questions….

The first impact of the end of QE/ZIRP will be a rise in the US Dollar  versus a basket of currencies. Some people have pointed out that the Yen never suffered during Japan’s multi-decade ZIRP policy. But Japan is a major exporter, and buyers of Japanese good must buy Yen to purchase Japanese goods. Perhaps their trade surplus helps explain why the Yen has not been pressured as the dollar was.

The Fed liquidity bid under the market will disappear. That does not mean markets will head straight down; to the contrary, other factors — earnings, contrary sentiment, short squeezes, mutual fund inflows — have the potential to keep markets afloat longer than most everyone expects.

There are unprecedented aspects to this and then there are some historical guidelines as well.  Don’t miss this series, gang.

Source:

The End of QE Part II (TBP)

Read Also:

What Does QE2’s End Mean for Various Asset Classes (Part I)  (TBP)