Does anybody remember QE? (hint: Not Queen Elizabeth.....)

Oct 21, 2019 | Jeremy Goldfarb


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QE....or quantitative easing. Does anyone remember that? It wasn't that long ago that this monetary stimulus method came on the scene full force on the heels of the financial crisis back in 2008. By design, it was used heavily by the fed and other national reserve banks to grease the wheels of credit growth and liquidity.

 

Well....it's back again. Not like it ever really went away, but meaningful reductions in the Fed's balance sheets were the way of the day for the past couple of years, and recently the tide has turned.

the Fed has been expanding its balance sheet in recent weeks, purchasing roughly $200 billion of bonds since the end of August. Accordingly, the annual growth rate of the Fed’s balance sheet has moved to -5% from -10%. Meanwhile, major central banks around the world have also resumed balance sheet expansion in aggregate, thanks in large part to the ECB’s stimulus announcement in September, which included a cut to the deposit rate into deeper negative territory and plans to resume net asset purchases of €20 billion a month “for as long as necessary to reinforce the accommodative impact of its policy rates.”

**RBC Portfolio advisory group

 

So, the economy is a-slowin' and we can kind of see it coming.....but when will the shoe drop? Will it drop? How far will it drop?

 

These are all great questions that investors focused on shorter term cues should be asking themselves today.