It appears that investors are looking almost exclusively to quantitative easing as the main tool for stimulating economic growth and the prevention of a double dip recession.
However, I think it is very much overlooked that quantitative easing is likely to play a role in increasing commodity prices at a time when most corporations are having difficulty growing the top line. The recent issues at P&G in terms of raw material cost increases and the effect on profit might be a general leading indicator for industry.
Higher cost and low revenue growth means lower profits, sometimes called a margin squeeze. This perhaps will happen across industries.
Wall street is extremely sensitive to eroding profit margins and will penalize individual stock prices at the hint of any such decline.
Stock markets still have not achieved a balance in considering macroeconomic factors, fundamental analysis, technical analysis, speculation, and high frequency trading. I believe that continued government intervention disrupts the natural balance that happens in an efficient, free market with a diversity of players.
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