QE3 Might Help the Markets, but It Won’t Save the Economy: Lance Roberts
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Stocks endured a free-fall Thursday, and the major indexes in the U.S. plummeted. The Dow Jones Industrial Average fell nearly 513 points, or 4.3%, and the Nasdaq lost almost 137 points, or 5.1%.
Market psychology has deteriorated thanks to the debt ceiling debate. Plus, fundamentals are also looking ugly. Last week's shocking GDP data and this week's soft manufacturing data and worse-than-expected consumer spending numbers being the most glaring examples.
All the negativity has led to renewed talk of another round of quantitative easing -- the Federal Reserve's stimulus program to spur growth by buying up government bonds.
Lance Roberts, CEO and chief strategist of Streettalk Advisors, says there is nothing more certain than QE3 and the potential for another recession. "The trend of the data is all negative, so barring any quantitative easing program from the Fed, we will probably be in a recession by the end of the year."
Roberts is of the mind that the Fed will step in to help stave off another recession, but the potential for it to work after QE1 and QE2 is not great due to the law of diminishing returns.
To top that off, he says markets, not consumers, will feel all the benefits if QE3 should come to pass. Consumers will actually take a beating because commodity prices -- oil and food prices -- will jump as the Fed pumps more dollars into the economy.
If it were up to Roberts, economic and job growth would come from keeping taxes low and taking "the breaks off oil and gas drilling," which he says would create an immediate 3 million jobs.
