MLR - If Ben Bernanke announces that QE2 is the last of the easing policies for now, will there be a negative market reaction?

Published:

24 Apr 2011 13:13 ET

Q: Do you think the market is expecting an announcement of QE2.5 or QE3 (quantitative easing) in Wednesday's [April 27, 2011] meeting? If Ben Bernanke announces that QE2 is the last of the easing policies for now, will there be a negative market reaction? Wondering if I should ease up on long positions or hedge going into Wednesday's meeting?

A: There is no need to try and predict the news and the market's reaction. Just watch what the market does. We don't have a crystal ball, so we really can't answer any of these questions definitively, and we don't "adjust" positions while trying to predict the news. For example, if we had known Standard & Poor's was going to downgrade the U.S. credit-watch to negative last Monday [April 18, 2011], what should we have done? Should we have sold all our stocks? That would have been a big mistake. Even if you could predict the news, you can't predict how the market will react. Don't waste your time trying.

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