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Is a big sell-off coming?
Thu, 28 Oct Pre-Open

QE2. Anyone with even a semblance of trading mentality cannot afford to ignore this acronym. Called Quantitative Easing II, the term is going to be in very sharp focus the next week. It is because this is when the US central bank meeting will take place and in it will be the all important decision taken – the decision to decide whether further monetary easing is required or not.

As far as the grapevine is concerned, the decision to undertake another round of quantitative easing is just a formality now. And it is the magnitude of the same that will mostly decide the fate of the asset markets world over.

In view of this, the battle lines have already been drawn. Some experts are of the opinion that QE2 will set the stage for another round of bull-run. However, others don't seem so bullish.

Count Marc Faber in the latter camp. The author of the famous Gloom, Boom and Doom reports, Faber told Bloomberg that anything under a trillion dollars will disappoint the markets. He also opined that markets are stretched right now and hence, a correction is overdue.

However, he does not expect a bear market to be around the corner. Instead, he believes that we could have a very strong boom in stocks and commodities. This could be similar to the one experienced between December 1999 and March 2000. It was the time when the markets went up very strongly.

Faber does not believe that bonds will make for good investments over the next few years or so. This is because he is firmly in the inflation camp and argues that under such circumstances, this asset class will not be able to enhance purchasing power or even maintain it. Faber also seemed bearish on China. He believes that there are quite a few imbalances in the Chinese economy and the most recent hike by the Chinese central bank amounts to nothing.

Faber has advised investors to buy equities and precious metals. He also likes agricultural commodities.

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Feb 20, 2018 11:09 AM