We discovered last year that apart form the elite one percent mega rich and the banks, the emerging markets were the main beneficiaries of QE. This was done via off balance sheet transactions. Now we are seeing a renewed inflow into ishares Emerging Markets ETF. This must surely be an indication that the markets expect that the Fed will eventually have to give in and increase QE as opposed to tapering. I dont see the Fed actually reversing the taper until the market sees a significant correction of around 30%. They will keep suggesting that there policy remains accommodative while they can blame the cold weather, but what happens when the summer comes and there is no improvement in the data? I can not see how the Fed can continue to taper QE towards the end of the year. I certainly don't see how the they can end QE by the fall.
ishares Emerging Markets ETF weekly chart
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