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  • buffet_munger buffet_munger Mar 27, 2013 10:22 AM Flag

    Fed likely to end ‘QE’ in 2013. Here’s what to do, says SocGen


    Fed likely to end ‘QE’ in 2013. Here’s what to do, says SocGen
    March 27, 2013, 8:59 AM
    Cheap flows of central bank liquidity are not going to be around forever and an end to the closely watched U.S. Federal Reserve quantitative-easing program could be here before you know it. Or by the end of this year in any case. Analysts at Societe Generale are looking for improvement in the U.S. recovery to trigger the Fed to begin tapering into asset purchases after the summer with a full stop to liquidity injections by the turn of the year.

    So what should you, as an investor, do about it?

    Getty ImagesFed Chairman Ben Bernanke
    Well, for starters, the U.S. dollar DXY +0.48% is a good place to throw your money, analysts at Societe Generale said in their recently published Multi Asset Portfolio report.

    “Currencies have been held hostage by QE over the last few years,” they said. “Our FX strategist expects the U.S. dollar to rise against all the major currencies by the year-end, including the euro.”

    Secondly, gold GCJ3 +0.56% is not the place to be. The stronger dollar as well as higher real rates and a significant reduction in hedge fund net long positions make the shining metal a less attractive investment.

    Also take a closer look at euro-zone equities XX:SXXP -0.74% . Historically, economic recoveries in the U.S. have benefited the euro zone and Societe Generale expects the stateside improvement to have ripple effects in Europe.

    “Euro-zone equities are much more cyclical by composition and full of international companies which should benefit from positive news from the U.S.,” the analysts said.
    The region’s stocks may be cheap at the moment for good reasons (Cyprus bailout, political turmoil in Italy, growth problems and limited progress in a banking union to name a few), but this could be an excuse to buy in.

    “We argue they deserve a closer look as many reforms shaped to bring medium- to long-term benefits have been adopted in Spain and Italy. Meanwhile, Ireland and P

    Sentiment: Strong Sell

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