Expectations on Fed Behaviour: QE 2.0

Here is a collection of article headlines I put together while browsing the online financial media:

forbes:

wsj:

smartmoney:

barrons:

reuters:

nytimes:

bloomberg:

The main idea is clear: the Fed should do more quantitative easing as deflation is looming and the economy has gotten weaker. This suggests that expectations are oriented towards higher bond prices and a lower US Dollar.

Given the prevalence of this view at the moment and taking a contrarian approach, I would bet on falling t-notes prices and a rising dollar for a while. I would also not expect the Fed to talk down the economy as the latest economic reports (especially the GDP report) were not bad in the current context and, in fact, had some bright spots.