And Now Presenting: The Hangover

hangover QE2Illustration by Katya Wachtel

Today’s the day: The training wheels come off the economy.After several months of bond buying on the part of the Fed, with the intention of boosting asset prices, that’s over.

The controversial program known as “QE2” (because the first bond buying was done during the financial crisis) has been baked into the market since early August, when Bernanke raised the possibility at his famous “Jackson Hole” speech.

The results have clearly been mixed. The economy’s recovery is still on mixed terrain. Inflation has surged (or as the Fed sees it) deflationary risk has dramatically abated.

Some market moves haven’t gone exactly as some expected, such as the INCREASE in Treasury yields, despite the increased bid for bonds. Despite this, some expect yields to surge with program over.

Anyway, to figure out how the hangover might look, we’ve put together the numbers of what did what during the program, from equities, to metals, to Treasuries.

S&P 500: Up 23.9%

10-Year Yield: Up 19.4%

Copper: Up 25.6%

Crude oil: Up 25.2%

Gold: Up 21.5%

Shanghai Composite: Up 5.8%

Sensex: Up 4.7%

1-year inflation expectations: Up 48.1%

5-10 year inflation expectations: Up 7.1%

Dollar Index: Down 10.4%

Where is the economy now?


August 2010: 9.6%

May 2011: 9.1%

Result: Down 0.5%


Q2 2010: 1.6% growth

Q1 2011: 1.9% growth

Top Stocks in QE2

Top 5 Dow Stocks:

  • Caterpillar: Up 61.6%
  • Alcoa: Up 53.7%
  • IBM: Up 37.5%
  • Chevron: Up 37.3%
  • Exxon: Up 36.1%

Top 5 S&P 500 Stocks:

  • Cabot Oil and Gas: Up 131.1%
  • Netflix: 108.3%
  • National Oilwell Varco: Up 106%
  • CBS: Up 104.7%
  • Chipotle: Up 101.4%

Source: Bloomberg

How could things get a whole lot worse?

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at