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While I'm with you that the prior poster's understanding is irreparably flawed, I think the story of QE is more complicated. I think the "end" of QE is not quite an appropriate description. I would say that what we call QE3 was the Fed pressing the gas to the floor. The "end" of QE3 is really more like an easing off to mid-throttle (which, admittedly, was probably the market's anticipated approach). The Fed is easing off of its asset purchases, but will retain a historically large balance sheet for some time--in fact, it appears that it will use rate hikes before liquidating its asset purchases.
Agreed. And it looks like we're holding guns to our banker friends so that they continue bond buying.
As for the rate hikes, we'll see. Not a lot of borrowing going on right now even with these lows.
While we still feel a little 'toppy' and overbought, it's hard to fight this tape.
Just look at the action into yesterday's close. Textbook high-frequency trading static began RIGHT at the 2-hour warning.
S&P's retreated from touching 2000. Talk about a psychological resistance figure.
Last edited by TrexDigit; 10-30-2014 at 12:28 PM..
The U.S. QE program is dead and I'm STILL waiting on that "stock market crash" you wingnuts have predicted would occur when QE ended...
Instead, stocks are at record highs.
"...A lot of the fears that led to the selloff in the middle of October turned out to be unfounded, and U.S. interest rates are even lower than when we started, which makes the case for equities even stronger," said David Kelly, chief market strategist at J.P. Morgan Funds, referencing a 7.4 percent decline in the S&P 500 over a four-week period ending Oct. 15.
Relative to where we were two weeks ago, we know earnings are going to be good, with 75 percent beating, which is the strongest since 2010, so it's a very good earnings season, and we didn't know that two weeks ago. Another part of it is good numbers for the U.S. economy, and then of course you have Japan, so the market had a lot of momentum going into today," Kelly said.
"So it's clear the selloff in the middle of October was unjustified," Kelly added..."
And yes, I know that Japan boosted their QE - that's NOT US. Japan still needs QE. We DON'T:
"...Friday's decision throws into focus the sharp contrast of fortunes for the US and Japanese economies after the Federal Reserve on Wednesday brought an end to six years of bond-buying and considers an interest rate hike.
And on Thursday the Commerce Department said the US economy expanded an annualised 3.5 per cent in July-September, beating expectations of 3.0 per cent.
Japan's economy, on the other hand, contracted 7.1 per cent on an annualised basis in the second quarter – its steepest quarterly drop since the 2011 quake-tsunami disaster – as it was hit by a sales tax hike in April..."
The U.S. QE program is dead and I'm STILL waiting on that "stock market crash" you wingnuts have predicted would occur when QE ended...
Instead, stocks are at record highs.
Me too.
Watch as it turns to, "But... but... but.... rates are going up!"
Which obviously is not the point of this thread.
Many bears have underestimated this recent reversal as have many posters here.
Me too.
Watch as it turns to, "But... but... but.... rates are going up!"
Which obviously is not the point of this thread.
Many bears have underestimated this recent reversal as have many posters here.
Yup.
Interest rates WILL of course go up - but the rise will be gradual and happen more and more as the economy continues to improve. They are NO about to suddenly shoot up the way those same posters who have underestimated the improvements in the economy seem to think they will.
All in all the FED has done a MASTERFULL JOB of giving the recovery what it needs when it needs it. For a number of years QE was needed, now its' not - and the FED did exactly what it needed to do to gradually ease us out of QE at just the right pace to keep economic growth continuing.
Yup.
Interest rates WILL of course go up - but the rise will be gradual and happen more and more as the economy continues to improve. They are NO about to suddenly shoot up the way those same posters who have underestimated the improvements in the economy seem to think they will.
All in all the FED has done a MASTERFULL JOB of giving the recovery what it needs when it needs it. For a number of years QE was needed, now its' not - and the FED did exactly what it needed to do to gradually ease us out of QE at just the right pace to keep economic growth continuing.
Ken
Agreed. And add to it, the psychological notion of ending QE was overplayed. Once cash started coming in from the sidelines, retail followed institutional buyers and we saw large positions 'chasing' gains. Not to be left out, dips have been bought and we've built a pretty solid base here as volatility is getting crushed back down through the teens.
Agreed. And add to it, the psychological notion of ending QE was overplayed. Once cash started coming in from the sidelines, retail followed institutional buyers and we saw large positions 'chasing' gains. Not to be left out, dips have been bought and we've built a pretty solid base here as volatility is getting crushed back down through the teens.
Yup.
Based on the S&P P/E (price/earnings) ratio, stocks are pretty much priced exactly where they should be (compared to the 25 year average).
IF stocks were really simply "pumped up" by QE, that would NOT be the case.
The S&P P/E ratio is probably the best single indicator of whether or not stocks are overpriced - and according that indictor, stocks are priced just fine and the stock market is at levels it DESERVES TO BE.
And the most recent earning releases continue to show very very strong earnings for the companies that make up that S&P 500 index. U.S. companies are very healthy, with strong earnings and thus good stock prices.
It's not that hard to understand.
However, 'QE' hasn't really ended in a global sense.
And stocks are a global market.
Japan's QE should and does have some of the same effects on the markets. Maybe their QE and other money shenanigans is more directed towards their own people and markets, but the effect is obviously more global.
And anyone that doesn't think that QE's don't distort conventional markets is fooling themselves.
So far so good, but if things get jumping and too hot, I will be more cautious moving forward.
However, 'QE' hasn't really ended in a global sense.
And stocks are a global market.
Japan's QE should and does have some of the same effects on the markets. Maybe their QE and other money shenanigans is more directed towards their own people and markets, but the effect is obviously more global.
And anyone that doesn't think that QE's don't distort conventional markets is fooling themselves.
So far so good, but if things get jumping and too hot, I will be more cautious moving forward.
Japanese QE is NOT going to make much of a difference to the U.S. stock market - and if those "QE is the only thing propellig the stock market" folks had been right, the Japanese QE would NOT have been enough to prevent the stock market collapse they projected - certainly not enough to propel it forward as it has done. Fortunately, the expectations of those folks were never right to begin with.
As I've said all along - the actual impact to the stock market from QE has always pretty insignificant. The only impact it really had was pyschological - and that has long since worn off. The crash to the market happend MONTHS ago when the end of QE was first announced and the market took a big hit. However, since that impact was pretty much purely psychological, once investors had digested the fact that QE was going to end, the markets roared back - and as I've been saying for months now, when QE actually ended, the market just shrugged it off.
But quantitative easing is the gift that keeps on giving. Even after the purchases end, its effects will persist. How could that be? The Fed will still own all those bonds it bought, and according to the agency itself, it’s the level of its holdings that affects the bond market, not the rate of addition to those holdings. Having reduced the supply of bonds available on the market, the Fed has raised their price. Yields (i.e. market interest rates) go down when prices go up. So the effect of quantitative easing is to lower interest rates for things Americans actually care about, such as 30-year fixed-rate mortgages.
But quantitative easing is the gift that keeps on giving. Even after the purchases end, its effects will persist. How could that be? The Fed will still own all those bonds it bought, and according to the agency itself, it’s the level of its holdings that affects the bond market, not the rate of addition to those holdings. Having reduced the supply of bonds available on the market, the Fed has raised their price. Yields (i.e. market interest rates) go down when prices go up. So the effect of quantitative easing is to lower interest rates for things Americans actually care about, such as 30-year fixed-rate mortgages.
If the Fed had not bought and held all of these bonds?
Thats a interesting take on it. So really the question is....when will they sell?
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