Hedge Fund Live's  Instablog

1. End of QE2

As we all know the $600 billion treasury securities buy up aiming to pump money into the economy has helped as the stock market rallied in the first 5 months. The QE2 is set to end at the end of June which is not very far away. It is hard to predict how this will affect the economy but it will definitely slow down our growth later this year.

2. Stronger Dollar

When I first read that I thought to myself, why is that a bad sign for the stock market? For months we talk about the weakening dollar and now we complain about the dollar strengthening? So I kept reading. So the dollar has strengthened in the past few weeks and most likely will continue to do so with the end of QE2. Some experts say that the weaker dollar makes products of multinational companies cheaper overseas, thus, increasing earnings and helped stock prices.

3. Weak economic indicators

For over a month, I’ve hear about this. Our economic numbers continuously fall short of analyst expectations except for inflation rates which is not the kind we are looking for. The first quarter GDP growth of 1.8% falls short of analyst expectation of 2.2%. The lower than expected economic growth rate will be reflected in the market.

4. Seasonal factors

Historically the market slows down between May and October, trading volumes trends down. Growth rate also slows from an average of 7.5% increase in the previous months to 0.4% from May to October.

5. Treasury rate

With QE2 coming to an end, people are expecting an increase in Treasury yields but instead the opposite has happened. The treasury yields has decreased from earlier this year. It is a sign that investors are looking for safer investments.

PS. Starting my internship at LIU next Tuesday and I am excited, it’s going to be Legen… wait for it… dary! Sorry, been catching up on a little How I met your mother. Great show.