In an FT video, published today, the following is said:
[I]fQE got asset prices up, shouldn't the end of QE mean that asset prices will fall? All else being equal, yes, it should.
If the end of QE does bring about a correction, which assets will be hit the hardest? Hard to say. But if interest rates rise, companies with low earnings now but high hopes for profits down the road could be hit the hardest.
The unfortunate thing about markets, of course, is that all things are never equal. Indeed, this is what central bankers and most everyone else are piously hoping: that strong growth and earnings could outweigh the fact that cash is being pulled out of the economy.
Yet, if that growth brings about increased wages, inflation, and interest rates at the same time as QE is winding down, asset prices could fall very sharply indeed.
I suggested the issue is somewhat bigger than that, yesterday.
But we're on the same trajectory.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
There are links to this blog's glossary in the above post that explain technical terms used in it. Follow them for more explanations.
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Buy me a coffee!
“…..Indeed, this is what central bankers and most everyone else are piously hoping: that strong growth and earnings could outweigh the fact that cash is being pulled out of the economy…..”
Where do they think this strong growth and earnings is going to come from ?
The Trump tax reductions are said to have just produced record share buybacks. Hardly a recipe for growth and earnings is it ? Except for the already wealthy.