BARCLAYS: There’s Almost No Way To Avoid A Stock Market Dive Now
Mar. 19, 2012
With U.S. economic data continuing to show a strengthening recovery and Europe’s worries temporarily alleviated, it can come as little surprise that the S&P 500 is up +11.65 percent this year.
But there are a lot of reasons to doubt that this rally will continue, according to Barclays U.S. equities strategists Barry Knapp and Eric Slover in a note out late last week.
They write that this could easily be a “heads I win, tails you lose, scenario.” If past rounds of easing are any indication, then the coming end of the Federal Reserve’s “Operation Twist” will launch a pullback in equities:
The only way an end to Operation Twist doesn’t cause such a reaction is if economic data deteriorate and the Fed decides that more easing—likely in the form of sterilized QE—is necessary. This, too, has a downside risk for equities, since it means the economy is not as strong as investors expected it to be.
Knapp and Slover explain this Catch-22: