Market Review: QE3?

Will there or won't there be QE3.  Let me rip a sentence from the FOMC statement "“Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery.”

A couple of words have huge implications as to whether QE3 will happen.  Unless and substantial are two words that should stick out.  Now the data recently has been decent moving up, but has it been and will it be substantial.  In the Feds mandates from Congress it says that the Fed must "establish the statutory objectives for monetary policy--maximum employment, stable prices, and moderate long-term interest rate."  The Fed in this enviornment has been able to keep price fairly stable, and interest rates low, but what hasn't happened is jobs, maximum employment.

What I think this statement says and this is my opinion is that unless GDP and jobs grow at an extraordinary rate in the next month the Fed will step in and enact QE3.  Obviously this is a short term fix, but the fact is that markets are looking for it like like a junkie looking for a fix.

This morning markets were trading down and came back in the afternoon on the FOMC and good jobs numbers, this shot of optimism may fuel another bump in the S&P and the markets in general.  I still expect some pullback, but if there is an expectation that the Fed will act the markets will rise.



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