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 website will not be considered clients of T11 Capital Management LLC just by virtue of access to this website.
T11 Capital Management LLC only conducts business in jurisdictions where licensed, registered, or where an applicable registration exemption or exclusion exists. Information contained herein is not intended for persons in any jurisdiction where such distribution or use would be contrary to the laws or regulations of that jurisdiction, or which would subject T11 Capital Management LLC to any unintended registration requirements. Visitors to this site should not construe any discussion or information contained herein as personalized advice from T11 Capital Management LLC. Visitors should discuss the personal applicability of the specific products, services, strategies, or issues posted herein with a professional advisor of his or her choosing.
Information throughout this site, whether stock quotes, charts, articles, or any other statement or statements regarding capital markets or other financial information, is obtained from sources which we, and our suppliers believe reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. Neither our information providers nor we shall be liable for any errors or inaccuracies, regardless of cause, or the lack of timeliness of, or for any delay or interruption in, the transmission thereof to the user. With respect to information regarding financial performance, nothing on this website should be interpreted as a statement or implication that past results are an indication of future performance.
