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11/03/10 ECONOMIST REPORT

11/03/10 ECONOMIST REPORT. Economic Indicators Recap. Mid-Term Elections. Generally, Republicans seen as more favorable to investors and business. So far, the GOP has gained 60 seats in the House and 6 seats in the Senate, with 11 and 2 open seats remaining, respectively.

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11/03/10 ECONOMIST REPORT

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  1. 11/03/10ECONOMIST REPORT

  2. Economic Indicators Recap

  3. Mid-Term Elections • Generally, Republicans seen as more favorable to investors and business. • So far, the GOP has gained 60 seats in the House and 6 seats in the Senate, with 11 and 2 open seats remaining, respectively. • Some claim gridlocked political system will be beneficial to market, others say it could hurt the market. • Republican win already priced into stocks.

  4. QE2: Description • What is quantitative easing? • FOMC decides to purchase Treasury securities. • Billions pumped into system, increasing liquidity and inflation. • Rarely used. • Benefits • Increases inflation rate. • Lowers interest rates. • Augments international exports. • Risks • Hyperinflation. • Currency devaluation in global economy. • Another bubble. • Failure.

  5. Dollar/Stock Correlation

  6. QE2: Today’s Announcement • Since 2008, the Federal Reserve has purchased $1.7 trillion worth of assets. • Market expected announcement of $500 billion QE. • Federal Reserve will purchase $75 billion of securities per month over the next 8 months, for a total of $600 billion. • In addition, $300 billion from QE1 will continue. • Volatile market fluctuations after announcement end at post recession high of 11215.13.

  7. Looking Ahead… • 11/04/10 : Employment Situation. • 11/15/10 : Retail Sales. • Watch how the market settles over the next two days as this week’s events are fully processed. • Market will be looking for new catalysts to provide next bullish or bearish trend. • Success or failure of QE2 could have profound impact on U.S. economy.

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