Nov 3. Elections over, now Fed QE announcement

Nov 3.  Stocks were strong, the dollar weak, and long treasuries firmed as the market looks past midterm elections to Fed’s QE announcement.
–I don’t have strong opinions about market action here, but will just note a few things that could have an impact.  On the domestic side, political gridlock and acrimony is likely: Bush tax cuts probably won’t be fully extended.  99ers unemployment benefits are likely to expire (taking a big chunk of purchasing power away from the economy).  Food prices continue to rise almost exponentially, further chewing up avg household budgets.  And finally, more and more state pension funds are lowering target return assumptions, which means a combination of higher taxes and benefit cuts, both of which will entail storms of protest. It seems as if much of the pain will be shouldered by what once was known as the “middle class” over the short term, though some changes in the political structure will likely lead to improvements over the next year.  Or, it could all deteriorate badly.
–Of course Europe is already struggling with the new austerity.  Irish bond yields are exploding higher.  Protests in Greece have escalated a notch, now featuring bombs being sent to various euro agencies. Sovereign debt and bank debt problems still plague Europe.  And bank problems are still simmering on the back burner in the US.

Posted on November 2, 2010 at 5:17 pm by alexmanzara · Permalink
In: Eurodollar Options

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