Of Course It's a Bad Deal
Time Bomb
Sunken Mermaid Attention, and WaPo Found Pimping for Protestors
The Pregame Is Over for Trump vs. DeSantis
Stop Scaring Our Kids to Death
Blame the Media for the National Debt
Ron DeSantis, Real Presidential Firepower
Democrats Abandon Working Class, Become Party of Freeloaders
The Debt Disaster
The U.S. and China Wage Diplomatic War in the Central and South Pacific
Our Fake Spending Debates
108 Former World Leaders Support Regime Change in Iran
Ambush Impeachment in Texas Stole from Voters
Past Legislation Takes Center Stage in DeSantis-Trump Primary Feud
'Mystery Republican' Reveals He'll Support the Debt Ceiling Bill, Sending It to House...

Is "Risk On" Trade Over?

The opinions expressed by columnists are their own and do not necessarily represent the views of Townhall.com.

There’s a lot of talk right now about U.S. credit downgrades and whether we can possibly get a Washington budget deal that actually controls spending and borrowing.

Stocks are worried. And they should be. But there is an additional danger lurking out there that investors need to be paying close attention to: the end of QE2.

In the long run, I think it would be great if the Fed finally stopped pumping all this inflationary money into the system. But shorter term, my advice to you is "caveat emptor"-- investors beware.

The so-called “risk-on” trade, which means the cheaper dollar alongside booming stocks and commodities, has been a staple of this market going back to Fed head Ben Bernanke's first QE2 announcement late last August.

Gold, silver, energy and oil, copper and raw materials, foods, have all obviously soared on this quantitative easing. And so have the exact same sectors in the stock markets.

But the risk-on trade may soon be replaced by the risk-off trade.

Keep an eye on next Wednesday, April 27th. That’s when the Fed releases its minutes. There may very well be an "end QE2 signal" and that could mean the beleaguered dollar -- at least temporarily -- will go up, not down. It might also mean that commodity, energy, and even industrial stocks could go down, not up.

Already, I notice the best performers have been defensive shares, like health care and utilities, not the cyclical economic growth groups.

There may be a correction in the cards as the Bernanke Fed’s ultra-easy money comes to an end. And that, investors, is what you should be looking out for right now.

 Get John Ransom's daily market commentary at the Ticker:

Join the conversation as a VIP Member


Trending on Townhall Video