US Edition The market slump at the end of last week was prompted by disappointment in Ben Bernanke's response to the current crisis. The market wanted the Federal Reserve chief to launch a third round of quantitative easing but instead it got "Operation Twist" .
On this side of the Atlantic, the prospects for another round of easing – dubbed QE2 – are increasing. The minutes from the latest Bank of England rate-setting meeting show committee members swinging in favour of more asset purchases as a way of stimulating the economy.
UBS reckons the Monetary Policy Committee will announce a £50bn gilt purchase plan in November, which it will spread over three months.
In anticipation of this, analysts at the Swiss investment bank have created an index of six shares in sectors that will benefit from QE2. UBS reckons these are not the only shares that will benefit, but that they provide a good window on QE2 and the UK economy.
Today, Questor takes a look at the six shares UBS has selected to include in the index and assesses whether an investment in these shares will be a good or bad idea.
Lloyds Banking Group
35.23p +1.085p
Questor says SPECULATIVE
Questor has shied away from the banking sector because there has been so much uncertainty surrounding it.
The economic backdrop is generally gloomy, the Independent Commission on Banking (ICB) only recently issued its report and bad loans are still present on lenders' books. However, once the crisis is over – and it will end at some point – the company could once again thrive.
Questor remembers in the 1970s that equity in NatWest was trading as a penny share. The bank was eventually sold to Royal Bank of Scotland for about £14 a share in 2000. It is only on this ultra-long-term basis that Questor feels confident in saying buy - and there will be many challenges along the road. That's why an investment must be regarded as speculative.
Kingfisher
241.6p +0.80p
Questor says BUY
Another sector of which Questor has been wary is the retailers – but have the shares fallen too far?
Of course, in theory, retailers should benefit as quantitative easing is a way of boosting the money supply and getting cash flowing around the economy.
DIY group Kingfisher is investing heavily in its business this year and its interim result saw "adjusted" pre-tax profits rise 24pc. When exceptionals are stripped out, profits rose 22.3pc, which is still impressive.
Of course, if QE2 doesn't work and the global economy tanks then the retailers could be in deep trouble. However, the shares are trading on an earnings multiple of 10.2 and yielding 3.4pc.
At this level there is a strong buy case.
Home Retail Group
116p -0.9p
Questor says AVOID
Shares in the owner of Argos are trading on prospective yield of 9.1pc, leading the market to think the dividend will be cut.
Although its valuation has plunged, profits are likely to fall for the next couple of years. The current-year earnings multiple is at a discount to Kingfisher – but so it should be.
Questor thinks these shares are one to avoid.
Segro
217p +½p
Questor says HOLD
Commercial property group Segro is heavily exposed to the retail sector - so it is easy to see why the shares were included in this index.
The company has a new chief executive, ex-finance director David Sleath, and is expected to unveil a strategic review later in the year.
The group made some good purchases during the downturn, but some analysts see downside in net asset values of around a fifth even in a mild recession.
At the half-year stage, the net asset value stood at 377p a share, so the shares are at a 43pc discount to this. Essentially, the market expects the value of its property to fall.
Trading on a earnings multiple of 12.3 and yielding 6.8pc, Questor thinks the shares can be rated no more than a hold for now.
Barratt Developments
80.4p +0.3p
Questor says BUY
Barratt is one of Questor's tips of the year as a margin improvement play.
Whether QE2 will boost home sales is a debateable point, but an investment in Barratt is not about an improvement in the market – it is about stability and selling houses on land that was bought cheaply in the downturn. However, should QE2 boost the wider economy then people will feel more confident.
Trading on a multiple of 15 times, falling to 7 next year, the shares are a buy.
easyJet
353p +1p
Questor says HOLD
Last week there was good news from easyJet in the form of a maiden and a special dividend. The total payout comes to an impressive 44p a share. The airline is also in a better position than it was at this time last year in terms of forward booking, but 2012 is uncertain. The shares are a hold.