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Best and Worst Stocks for QE Infinity and Stagflation


The Federal Reserve's QE Infinity decision to buy $40 billion per month in bonds promises stagflation. This presents some interesting investment themes for the future.


Best Stocks for QE Infinity

As I wrote more than two years ago in Best Asset Classes for Stagflation, weak economic growth combined with increased inflation favor:
  • Commodities like gold (NYSE:GLD), coal (NYSE:KOL), crude oil (NYSE:DBO), and agricultural fertilizer (NYSE:MOO)
  • Foreign emerging markets (NYSE:VWO)
  • Large US multinational exporters that benefit from a weak US dollar (FEXPX)
  • Dividend stocks (NYSE:DVY)
  • Small-cap growth stocks (NYSE:IWO)
To that list let me add mortgage REITs (NYSE:REM) which purchase MBSs – thus benefitting from the Fed's $40 billion per month buying binge -- and lever up these MBS investments 10-to1 by borrowing cash at short-term interest rates – thus benefitting from the Fed's extension of its zero-interest-rate-policy (ZIRP) until mid-2015.

Worst Stocks for QE Infinity

Losers would be companies whose input cost structures rely heavily on commodities, such as trucking companies, airlines, cereal manufacturers, jewelers, and restaurants.

This article by Jim Fink was originally published on Investing Daily.

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The Fed's Third Time Won't Be the Charm

QE3: Not a Panacea for Home Builder Stocks

First Solar and LDK: Two Solar Power Stocks Headed in Opposite Directions

Twitter: @investingdaily
No positions in stocks mentioned.
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