How to invest, how to trade under the most or already least expected global impact of the end of US quantitative easing 2 at the end of this June?
At least one thing is clear in the otherwise cloudy crystal ball when trying to figure out what the Federal Reserve will do when its latest round of quantitative easing, or QE2, ends later this month: A large group of us may not be very surprised. While it may bee too early to know the exact form of the easing that the Fed will pursue in the next round, many believe that the monetary authorities will undoubtedly continue to throw money-lots of it-in whatever direction they deem necessary to prop up the economy and the financial markets. This said, in fact, confidently predict that the end of QE2 will have no impact on the markets this month, because prices have long since taken into account its utterly obvious continuance. Many traders say that it has to be crazy to believe the market hasn’t already discounted the end of QE2. The steep correction of commodities in a very short period of time last month month might signal that market has discounted the expectation on QE2 end. Investors should be prepared for more market volatility in the coming weeks. In this environment, a healthy allocation to risk assets is still appropriate for growth investors, as well as exposure to midcycle sectors. Additionally, we recommend at least a significant allocation to commodity-based assets as a hedge against inflation and dollar-price uncertainty. To this extent, Goldman Sachs, Morgan Stanley, J.P. Morgan and the latest Deutsche Bank reason on why they are taking long position in oil and other energy sector. Remember, though, that this strategy is not coming without risk. If you choose to pursue it, do so with your play money only. '+'
