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Looking Beyond QE3

September 28, 2012

Unprecedented monetary policy in Europe and the US helped extend equity market gains into September.
-Richard Golod, director global investment strategies, Invesco

Unprecedented monetary policy in Europe and the US helped extend equity market gains into September. Policy-action euphoria may continue to drive global equity markets, while concerns about a slackening US economy and lack of detail in implementing various European debt-crisis policies remain in the background. However, at some point, fundamentals will matter again, and I believe long-term investors should position accordingly.

 

  • US. Technical, quantitative and liquidity measures all suggest further upside in the S&P 500 Index, while fundamentals (economic growth, earnings and jobs) suggest limited upside and possibly even lower prices from current levels, in my opinion. The Federal Reserve Board's (the Fed) highly anticipated third quantitative easing (QE3) program may bolster asset prices - particularly for cyclical sectors, small-cap stocks, commodities and gold - but not the economy. I still believe investors should consider high-quality, dividend-paying stocks.

 

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