Skip to comments.MORGAN STANLEY: We Could See QE4 By The End Of The Year
Posted on 09/24/2012 11:05:44 AM PDT by blam
MORGAN STANLEY: We Could See QE4 By The End Of The Year
Sep. 24, 2012, 9:51 AM
Morgan Stanley chief U.S. equity strategist has a big report assessing the impact of QE on the stock market today.
In a note to clients this morning entitled QE3 More Is Required, Parker argues that "QE3 will likely be insufficient to significantly boost equity markets and we wouldnt be at all surprised to see the Fed dramatically augment this program (i.e., QE4) before year-end, particularly if economic and corporate news continue to deteriorate as they have over the past few weeks."
Parker goes on to explain his reasoning:
At this rate of MBS purchase and based on prior programs we see only a weekly 25bp expected return for S&P 500 from QE3. While such a return can accumulate over months, it is dwarfed by weekly S&P historical volatility (2.3% since 1980 and 3.0% since November 2008) and can easily be swamped by macro, earnings and geopolitical events. This is the main reason we suspect more QE3 (which we will call QE4) will be announced by year-end assuming the EPS trajectory pans out as we suspect.
Aside from forming the basis for Parker's QE4 call, the study arrives at seven main conclusions: 1.For every $10 billion in additional purchases of mortgage-backed securities by the Fed, the S&P 500 was boosted by about 0.25 percent the following week.
2.The stock market did better in weeks when the Fed bought more assets.
3.The stock market did better when the Fed purchased MBS than when the Fed purchased Treasuries.
4.The following week's stock market returns were not significantly correlated with the previous week's purchases, suggesting that the effect of QE purchases on stocks is pretty short-lived.
(Excerpt) Read more at businessinsider.com ...
People are already talking about the Fed doing QE4, but there's a problem with that.
QE3 is open ended, so how can we get a new round of asset purchases if the current round is never supposed to end?
QE4 will not be needed QE3 goes on and on and on...
When in need borrow from the printing machine. It’s only the future.
QE3 = QEternity
Someone will probably post the definition of insanity, but why bother? We have posted it every other time the far left fringe has tried the QE scheme, and it never does any good to warn socialists about the consequences of their policies.
The QE's will continue until every crony is made whole.
I think QE 42 is the one that’s going to work.
They’ve already anounced QE4-ever.
They’re going to buy mortgages with faux money “until the economy improves”.
The thing is, it will actually “work” for a while, keeping the economy from crashing and re-setting, but it will make the inevitable crash that much worse, and only postpone it a couple of years.
Ongoing QE3, start QE4, and voila! QE7!
Japan has launched an eighth round of quantitative easing to weaken the yen and cushion a slide back into recession.