Credit Suisse (NYSE:CS) analyst now predicts that a 4th round of QE (quantitative easing) will be needed before year’s end to ease mounting pressure in the short-term lending markets.
He said QE-4 would help rebuild bank reserves, which have dropped as the Fed has shrunk its balance sheet.
QE, commonly called “money-printing” for the way the Fed uses digitally created money to buy bonds from big financial institutions would be needed by year’s end to bridge a funding gap as banks scramble for scarce reserves, Credit Suisse’s managing director for investment strategy and research, as saying in a note to clients.
“If we’re right about funding stresses, the Fed will be doing ‘QE-4’ by year-end,” he wrote in the note. “Treasury yields can spike into year-end, and the Fed will have to shift from buying bills to buying what’s on sale – coupons.”
The Fed is in the midst of a buying T-Bills in a process that it insists is not QE but instead an effort to keep its benchmark overnight funds rate within the 1.5%-1.75% target range. In addition to the outright purchases, the Fed is conducting daily repurchase operations to stabilize the market.
No matter what the Fed wants to call it, it is QE, and supportive for equity prices going forward.
Tuesday, the major US stock market indexes finished at: DJIA -27.88 at 27881.63, NAS Comp -5.64 at 8616.19, S&P 500 -3.44 at 3132.52
Volume: Trade on the NYSE came in at 780-M/shares exchanged
- NAS Comp +29.9% YTD
- S&P 500 +25.0% YTD
- Russell 2000 +21.0% YTD
- DJIA+19.5% YTD
HeffX-LTN’s overall technical analysis for the major US stock market indexes is Bullish in here.