If today’s initial claims fall again, indicating underlying employment improvement, there is a lot to think about.

The Fed might decide QE isn’t needed- yields back up due to the Fed not buying and the concern rates might not be low for all that long.
The low for long/QE 2 scenario is almost entirely based on employment showing no signs of life.

The dollar might suddenly reverse as short dollar positions that were placed due to qe2/low for long outlooks are reversed.

Messages more mixed for stocks and commodities.
Employment growth indicates more demand is possible.
But fears of money printing induced inflation (whatever that actually means doesn’t matter for short term trading) subside.
Dollar strength causes dollar prices of commodities to fall.
Commodity stocks hurt by falling prices, internationals hurt by rising dollar/earnings translations/falling export margins, etc.
Valuations hurt by higher term structure of rates.

Basically a partial unwinding of the massive qe2/low forever/weak dollar market of the recent past.

One Response

  1. A lot of people think that QE2 and US election results (divided government) are already priced into the markets.

    ?

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