Latest Blog: Fireside Reading - 03/01/2024
-
-
CIO INSIGHTS
-
CIO INSIGHTS
- BACK TO CIO INSIGHTS BACK TO ARTICLES & INSIGHTS HOME
-
-
-
Investment Insights are written by Angeles' CIO Michael Rosen
Michael has more than 30 years experience as an institutional portfolio manager, investment strategist, trader and academic.
QE IMPACT?
Published: 10-31-2014QE3 (the policy, not a new Cunard ship) was launched 2 years ago and ended this week. The expanded it balance sheet by $1.6 trillion, or 62%.
Economists (and other, smarter people) will debate the efficacy of the program, probably forever. At the time, a large group of leading (mostly conservative) economists warned that QE3 would lead to higher inflation and the devaluation of the dollar. Well, that was wrong: inflation (from the PCE) was running at 1.5% in September 2012 and is 1.5% today. USD/Euro, for example, was at 1.29 back then, 1.28 now.
Supporters of QE (mostly liberal economists) argued then that the point of QE was to push interest rates lower in order to stimulate borrowing). Well, that was wrong too. The 10-year Treasury yield was 1.77% in September 2012, 2.34% now. Interest rates went up, not down, under QE3.
What did change in the past two years? The US economy has gained strength, and that has been reflected in the equity market. Monthly payroll growth was averaging 141,000 in September 2012, and today’s it’s 245,000. The unemployment rate fell from 8.1% to 5.9% in the past two years. And the S&P 500 is up 38%.
So, if QE3 did not have the anticipated effect of lowering interest rates, or the feared effect of runaway inflation and dollar devaluation, was it a success or failure? Again, this debate will likely go on for generations. My two cents is: neither. Perhaps it had some modest signaling value that the Fed would remain accommodative, but it’s hard for me to see any real world impact of this policy. Much ado about nothing, as Shakespeare said.
The US economy is moderately strong, inflation is low, and while there are many risks presently and on the horizon, it’s probably time (overdue, really) to abandon the zero-percent short-term rate that has punished savers for six years. The Fed will move cautiously, deliberately, but I see the coming change in Fed policy as not so much a tightening as a normalizing, and thus nothing to fear.
PRINT THIS ARTICLERELATED ARTICLES
-
Kids! 10-23-2014
On a totally non-market subject, more young adults are living with their parents, and here's the graph to prove it ...
READ BLOG POST -
(Not) Recommended Reading 12-20-2017
I don't like recommended lists. They turn experiences into a contest (and the winner is), and one reviewer's ...
READ BLOG POST -
From the Kentucky Coal Mines to the California Sun 01-14-2020
Rupp Arena is one of the iconic venues for college basketball in the country. It is named for Adolph Rupp, the legendary ...
READ BLOG POST
-
We strive build portfolios of best-in-class investment managers across all asset classes. If you would like to be considered for our portfolios, please contact us using our manager inquiries form.
- MANAGER INQUIRIES
-
SUBSCRIBE TO ANGELES' INSIGHTS
Get the latest investment information and stay on top of market trends.
SUBSCRIBE -
CONTACT US
SANTA MONICA
429 SANTA MONICA BLVD,
SUITE 650
SANTA MONICA, CA 90401
310.393.6300
GET DIRECTIONS -
NEW YORK
375 PARK AVENUE,
SUITE 2209
NEW YORK, NY 10152
212.451.9240
GET DIRECTIONS -
HOUSTON
5151 SAN FELIPE ST,
SUITE 1480
HOUSTON, TX 77056
713.832.3670
GET DIRECTIONS