Credit Suisse analyst: No more QE2? No problem

Still, June expiration has many worried; institutions to the rescue?
APR 27, 2011
The end of QE II should be a non-event, a Credit Suisse analyst said today. Although the end of the Federal Reserve's second quantitative easing program in June has many people worried, it won't have a major impact on the markets, said Pankaj Patel, managing director at Credit Suisse AG. One reason is that institutional buyers will step in as they did after QE I ended in March, said Mr. Patel, who spoke today at the annual meeting of the National Association of Active Investment Managers in San Diego. What's more, the Fed is a smaller player in the Treasury market than most think, holding about 14% of outstanding bonds, versus more than 25% in 1998, he said And many big investors have already prepared for the end of QE II by shorting bonds, Mr. Patel said, so huge further sales are not expected. Credit Suisse says to look for the Fed to stop talking about the “extended period” of low rates later this year and to begin raising rates next year. Mr. Patel's comments surprised some advisers at the conference. The biggest concern about the Fed's action in the bond market are not its holdings of Treasury debt, but its role in buying new issues, said Will Hepburn, founder of Hepburn Capital Management LLC and a former NAAIM president. “Rates have to rise to attract those [institutional] buyers,” Mr. Hepburn said. The rate rise will be enough to “shock” the markets, he said. Many NAAIM members “are cynical of a [stock market] rally like this,” said Anthony Welch, co-founder of Sarasota Capital Strategies Inc. “The Fed has been driving it.” The central bank has been like “a financial crack dealer” that will have a hard time unwinding its expansive monetary policies, Mr. Welch said.

Latest News

Federal judge dismisses Eltek manipulation lawsuit against Morgan Stanley Smith Barney
Federal judge dismisses Eltek manipulation lawsuit against Morgan Stanley Smith Barney

Nine-month electronic trading freeze and share lending program at the center of dismissed claim.

RIA wrap: Dynamic strikes South Carolina deal to reach $7B AUM milestone
RIA wrap: Dynamic strikes South Carolina deal to reach $7B AUM milestone

Meanwhile, Rossby Financial's leadership buildout rolls on with a new COO appointment as Balefire Wealth welcomes a distinguished retirement specialist to its national network.

Rethinking diversification amid a concentrated S&P 500
Rethinking diversification amid a concentrated S&P 500

With a smaller group of companies driving stock market performance, advisors must work more intentionally to manage concentration risks within client portfolios.

Merrill pays second settlement to former Miami Dolphins player, client of ex-broker
Merrill pays second settlement to former Miami Dolphins player, client of ex-broker

Professional athletes are often targets of scam artists and are particularly vulnerable to fraud.

Schwab touts AI as its biggest growth lever at investor day
Schwab touts AI as its biggest growth lever at investor day

The brokerage giant tells Wall Street it will use artificial intelligence to reach clients it has never been able to serve — and turn the technology's perceived threat into a competitive edge.

SPONSORED Beyond wealth management: Why the future of advice is becoming more human

As technical expertise becomes increasingly commoditized, advisors who can integrate strategy, relationships, and specialized expertise into a cohesive client experience will define the next era of wealth management

SPONSORED Durability over scale: What actually defines a great advisory firm

Growth may get the headlines, but in my experience, longevity is earned through structure, culture, and discipline