BOSTON (TheStreet) -- When QE2 set sail, the quantitative easing move by the Federal Reserve -- buying roughly $600 billion of Treasuries over the next nine month -- was intended to calm economic waters by lowering long-term interest rates.
But while home buyers and corporations may stand to benefit, many retirement plans could take a hit, especially those with a large exposure to bonds and bond funds.
|For some, the Federal Reserve's QE2 plan -- short for Quantitative Easing -- looms as large as the QE2 itself, or the Queen Elizabeth II cruise liner.|
David Kelly, chief market strategist at JPMorgan Funds
"There are a lot of different scenarios here, but they all have one thing in common -- they end badly for the bond market," he adds. "If the Federal Reserve pulls out sharply at the end of this, and goes cold turkey, you could see a big jump in long-term interest rates. If they try to extend the process by coming out with a QE3, then eventually it is going to lead to inflation, and that's bad for the bond market.