This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

4 Stocks to Watch as Quantitative Easing Winds Down

Stocks in this article: BACCCLFFCX

Chris Lau, Kapitall: As the economy improves, quantitative easing may decrease. What are some stocks to watch as interest rates rise?

The trillion dollar question market participants want the answer to is: when will quantitative easing (QE) end? Countries around the world have little reason to “taper.” Unemployment figures in the United States are mixed, Japan’s fiscal program will lead to flat growth at best, and emerging markets are beginning to show signs of strain.

Read more from Kapitall: Choosing Mid Cap Stocks and Looking to 2014 with Brian Peery

Meanwhile, China is enjoying a strong trade surplus. The lack of inflation risks and the forecast of mediocre GDP growth there suggests tapering will not be on the table. What should investors be doing next?

Hedge funds return cash

Investment hedge fund managers with a solid track record are returning cash to investors. David Tepper will give back up to $2 billion, which signals that opportunities for better returns are getting harder to find in the markets. Seth Klarman plans to return $4 billion, and Dan Loeb is planning to return around 10% of assets managed to investors.

But what about big banks?

A higher deposit rate will make it harder for banks to grow return on equity. Interest rates are so low that revenue from the spread between loans and deposits are very thin. Citigroup (C) and Bank of America (BAC) may face higher deposit rates, but will find it harder to make profitable investments as the Volker rule was approved. Citi is valued at a forward P/E of 10, while Bank of America is valued at 12:

Click on the interactive chart to view data over time.

As described by The  Wall Street Journal, the Volcker rule places limits on banks that receive federal deposit insurance from making risky bets for their own profit.

Resource sector could rebound

Strong exports from China mean demand for basic materials will be stronger. Iron ore, whose prices are stabilizing this year, could see higher demand. Cliffs Natural Resources (CLF) is down 37.6% in 2013, but the company is lowering expenses accordingly. Freeport-McMoRan Copper (FCX) entered the oil and gas sector last year. It provides investors with exposure to the energy sector and to copper.

To taper or not to taper

No one really knows when there will be tapering. The best investors could do is watch the change in sentiment for the markets.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,072.31 +98.00 0.58%
S&P 500 0.00 -2.75 -0.14%
NASDAQ 4,535.9230 -13.3030 -0.29%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs