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Market Outlook For Fed Meeting And Q2 Earnings

Not expecting QE three from Fed on tomorrow's meeting. The market rallied last two weeks in anticipating QE 3 or at least operation twist again.

With the 2012 being the election year, Fed will be very careful about any substantial actions. New economy statistics indicated a modest growth, my model suggested Q2 GDP growth around 2.8% to 3.3%.

There is very little reason for Fed to complicate political process at this moment.

With little chance of QE3, the market will go down substantially and European situation will get worse before getting better.

If Fed decides to go alone with QE3, the risk assets will fly and USD will have long term problems. If Republic win the power in 2012, they would like to change Fed Reserve Act more or less if QE 3 is announced.

Without QE3, consumer staples and discretionary stocks would be benefited. With QE3, energy and high beta stocks will rally.