How to profit from the Fed’s QE3 stimulus program
First, they should buy equities. According to Credit Suisse, shares have rallied by 10pc-15pc in the first few weeks of previous bouts of quantitative easing, but rolled over again within a few weeks of the end of the stimulus.
Rising inflation expectations will also increase investors’ appetite for cheap real assets, the most obvious example of which is US property. The fact that the Fed is pouring money directly into mortgage-backed securities at a time when the US housing market has already turned the corner is a very bullish signal for the sector.
Thirdly, investors should continue to favour income-generating investments.
Fourth, I think there is more to go for with gold.
Finally, Inflation-linked bonds are an obvious hedge and, within the equity market, I would look at shares in companies whose returns have a regulatory link with rising prices such as utilities and some infrastructure companies.