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Jakobsen: More QE is likely over next two years
Markets already regard the FOMC meeting as the single most important event, but when they meet on 17-18 September it will be even more significant than usual. That's according to Saxo Bank's Chief Economist and CIO, Steen Jakobsen, because that's when we find out whether the Fed will start a so-called "exit strategy".
But Steen argues that such a strategy is "merely a miscommunication". He thinks that forward guidance indicates that rates will stay lower for longer, and as a result, "more QE is likely than less QE", at least over the next 24 months.
Speaking about the FOMC's impact on emerging markets, he warns that the top 500 companies in the US get as much as 35% of their earnings from overseas, an amount which they cannot afford to ignore. Steen therefore says that on the one hand, it may be wrong for the Fed to try and solve the world's crisis, but on the other, EMs need to be an integral part of the Fed's decision making.
Overall, Steen feels that the concept that this macro policy can protect the economy is "wrong". He says it may work for a while, but it cannot actually create new jobs. The new jobs will stem from SMEs, which represent 85% of the economy, and they need to have easier access to credit.
02:18 minutes
Tags: business, businesses, earnings, economic policy, economy, emerging markets, ems, exit strategy, fed, federal reserve, financial markets, fiscal stimulus, investing, investment, jakobsen, lea jakobiak, macro, macro policy, markets, profit, qe, s&p 500, saxo bank, saxo tv, small and medium sized businesses, smes, steen jakobsen, tapering, the fomc, tradingfloor.com, us economy