QE4 Is A Gift That Investors Foolishly Refuse To Embrace
In September of 2012, the Fed embarked on QE3, with $40 billion per month in purchases of agency mortgage backed securities. Additionally, the Fed said that they would keep the Fed Funds rate near zero until, at least, 2015. QE3 ran for nearly two full years, inflating the Fed's balance sheet to $4.5 trillion before the Fed halted its purchases in October of 2014. As we are now at the very beginning of QE4, investors should take note of the fact that QE creates very specific behaviors in equities that doesn't deviate much other than in terms of intensity or velocity, if you will. Additionally, each subsequent version of QE becomes fine tuned to create dramatically greater results in the direction of the Fed's desire. In this particular time frame, the desire of the Fed is for inflation, as they have expressed countless times over the past many months. With that said, investors can expect that with QE4, markets will behave in a similar manner as QE3, except for two distinct differences: This is now a mature bull market, as opposed to 2012, when the bull market was just beginning. With maturity during secular bull markets comes greater velocity. Each successive leg of a secular bull market creates more significant upside as market participation increases. QE4 is significantly more expansive than QE3, both in terms of the amplification of the Fed balance sheet and the assets being purchased. It can be assumed with a great degree of accuracy then that QE4 will be an amplified version of QE3. In other words, the steady nature of ascent that was experienced with QE3 will remain, with the key difference being the velocity of the upside to come. Here is a look at the S&P 500 during QE3 from start to finish: Investors should expect the same results in the months ahead from the market in terms of the steady nature of gains to be captured. The only difference between QE3 and QE4 will be the degree to which the markets will increase in value, more than likely by orders of magnitude greater than anything we experienced from September 2012 to October 2014. Invest accordingly. Zenolytics now offers Turning Points and ETF Pro premium service Click here for details. Disclaimer This website is for informational purposes only and does not constitute a complete description of our investment advisory services. No information contained on this website constitutes investment advice. This website should not be considered a solicitation, offer or recommendation for the purchase or sale of any securities or other financial products and services discussed herein. Viewers of this...
It’s Time For Investors To Go All In On Equities
In order to understand the current market framework, an investor must disavow a handful of consensus opinions that are being regarded as fact: 1. This is not a bear market 2. Poor economic performance over the next few months doesn't necessarily equate to poor stock market performance 3. Far from being irrelevant and out of ammunition, the Fed is more relevant than ever 4. There is no historical reference to this market. It is completely unique and unprecedented in scope. Future results will reflect this fact. As dynamic as the markets are, Wall Street remains stale in more ways than one. Given recent events, the most obvious example is the rigid definition of a bear market, claiming that a fixed percentage decline constitutes a bear market irrespective of the pace of that decline or the environment in which the decline occurred. While labels may not matter in many situations, when a market is labeled a “bear market” then investors are prone to make historical references to prior real bear markets. When you compare a real secular bear market of prolonged length to what has a high probability of simply being a steep correction within a secular bull market, then your results will be flawed right from the onset. Nearly every piece of analysis that is emerging from Wall Street currently assumes that this is the beginning of a prolonged bear market, waving goodbye to the days of prosperity that are now far in the rear view mirror. From this foundation, accurate future results cannot be attained. How do we know that this is not a bear market? Over the past nearly 100 years, there have three secular bull markets. We are currently in the third secular bull market of the post-Great Depression era. Within these secular bull markets, each and every one has had one or more false bear market signals that caused investors to regrettably give up on the secular bull market prematurely. In the prior two secular bull markets, year 8 and year 5 of the secular bull saw dramatic declines. In the first secular bull market of the post-Great Depression era in 1962, the Dow declined 30% over a six month period, before continuing its rise, with a gain of 100% over the next three years. The 30% decline occurred in year 8 of the secular bull market. In the second secular bull market, beginning in 1982, in the 5th year, we had the 1987 crash, with a 41% decline from peak to trough. In three years time, the market was again 100% higher. We are presently in the 7th year of this secular bull market,...