More & More Chances of Quantitative Easing, QE3 Dreams Live On

With China’s growth slowing further and with Europe’s woes growing each day, economic data in the United States continues to ride the line closer to recessionary levels.  Japan hit a 28-year low on its broader Topix index of shares today, and now they key DJIA in the U.S. went into negative territory for 2012 today and on Friday.  It should probably be no surprise, but the calls for more quantitative easing measures are back on the rise.  Here are some of the fresh issues to consider on the call for QE3:

• Trading czar Dennis Gartman has just said that quantitative easing is now all but assured.
• Jan Hatzias of Goldman Sachs has also jumped on the QE3 bandwagon predicting that the Fed could further expand the balance sheet.
• Morgan Stanley has now put roughly an 80% of a chance of further easing measures, which may come as soon as the June FOMC meeting, for as much as $475 billion.
• A fresh CNBC survey polled 60 money managers, strategists, and economists after the dismal jobs report on Friday and 58% are in the camp that QE3 is coming versus only 33% predicting more easing six weeks earlier.
• TheStreet.com has given 5 names it thinks will benefit from QE3 if it comes.

At some point the U.S. and global economies are going to have to grow on their own without such strong support and infusion from governments.  That point just does not appear to be ‘today.’ Maybe you could argue that this is an election year and that this will drive the chances higher for more easing measures.  Either way, it seems that the markets are still hellbent on the notion that excessive government contribution has to be maintained to support the markets and the economy.

The question that remains to be answered in the U.S. is how the politicos and the Fed plan to deal with the fiscal cliff coming after the end of 2012 when government spending programs come at the same time as low tax rates expire.  Regardless of the election outcome, that is an issue which remains unanswered.

As a reminder, the next recession is just the next recession rather than a double dip recession.

JON C. OGG