Season of Easin'

S&P GSCI GLOBAL COMMODITY INDEX 
VS. U.S. 5-YEAR INFLATION EXPECTATION

The Fed has a great flexibility
To promote economic stability;
They may finish QE
If it's growth they foresee,
Or extend if they sense more fragility.

In the weakening outlook of Spring,
It appears to QE they must cling,
While back in the Winter,
We thought they'd begin ter
Discreetly unwind the whole thing.

"The majority of recent economic data has come in below expectations, which has opened the door for discussions about the possibility of more quantitative easing (QE)," says Guggenheim Partners CIO Scott Minerd, in a market commentary yesterday. As Minerd points out, only three weeks ago investors were expecting the Fed to start winding the QE programs down this year, and the release of Fed Open Market Committee meeting minutes bore out this expectation. Some Fed skeptics have recently decried this seeming inconstancy as proof that the central bankers "have no idea what they're doing." However, the economy ebbs and flows, and corrective measures must necessarily adapt.

The chart pictured here shows that, over the last three years, the Fed's QE initiatives have coincided with low points in cyclical indicators such as inflation expectations and commodity prices.  Both are currently headed lower, according to the chart.  In response, both the Fed and investors are "moving from fear over the reduction of QE to prognostications over the extension or expansion of it."  Concludes CIO Minerd: "All of this largely amounts to noise and the more important takeaway is that QE will last through the end of this year, and possibly into next year."