US stocks to rally as Fed seen continuing QE: Solaris AMC

US Stocks are seen rallying in near term as Fed is likely to continue quantitative easing till 2014, believes, Tim Ghriskey, CIO, Solaris Asset Mgmt.

“Every time the Fed pushes out the prospect of a rate hike it is favourable for the equity markets. So yes, we would see higher prices, we would see rally in stock prices,” Ghriskey said.
He said the recent flatness seen in US markets was on account of mixed data cues—a very strong Consumer Confidence number and weak Chicago Purchasing Managers Index (PMI) number. Below is the verbatim transcript of the interview Q: There is mixed data coming in - is that what’s keeping markets mixed as well? Or is it because of the heady run up that we had seen earlier on Wall Street and so there is this temperance?
A: Probably it could be due both the above reasons but the flat US market is related to mixed numbers; the very strong Consumer Confidence number and the very weak Chicago Purchasing Managers Index (PMI) number. Those two have a caused a very flat market environment. Also read: Bernanke Watch: Is he eyeing the exit? Q: As far as the Fed expectations go, CNBC survey seems to throw a quantitative easing (QE) till 2014. If that does happen do you see markets rallying or do you think that’s been factored into a certain extent?
A: Certainly one reason why the markets have been so strong here in the US is because Fed continues to pour liquidity into the system, which is very beneficial to financial assets and that is why we have seen the big rally. Every time that date gets pushed off, atleast the perception of that day, the expectation of that day gets pushed off, it is more liquidity for the system. So bad news is actually good news for the stock market in the US. Q: If indeed the QE is extended till 2014, how do you expect markets to react? Atleast in the near-term do you expect a rally?
A: The markets will continue higher, absolutely. So every time the Fed pushes out the prospect of a rate hike it is favourable for the equity markets. So yes, we would see higher prices, we would see rally in stock prices.