Latest Blog: "Everything Human is ... - 11/18/2022
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: 10-31-2014
QE3 (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 ARTICLE
Old Age 10-16-2014
It's been 3 years since US equities have corrected more than 10%. But there's no law about how long rallies can ...READ MORE
Fairy Tales 11-19-2015
The technology bubble of the late 1990s is a distant memory for most investors, and an ignorance for the rest. But back ...READ MORE
Sunrise or Sunset: Thoughts on a Post-Pandemic World (Part 1) 05-27-2020
Two and a half months of isolation engenders reflection, on what we've endured, and contemplation on what the future ...READ MORE
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.
How Can We Help You?Institutional Investors
Fully resourced investment office built to manage sophisticated client investment programsPrivate Wealth
Personalized discretionary portfolio and wealth management services powered by institutional processInvestment Management
Rigorous process and a flexible platform designed to meet client needsArticles & Insights
Latest insights and perspectives from the Angeles teamContact Us
Get in touch