After almost six years and over $4.4 trillion in asset purchases, the Federal Reserve plans to end its unprecedented monetary policy known as quantitative easing, or “QE,” in November 2014.
Though the end of QE has been widely anticipated, the actual termination of the policy represents a major turning point for financial markets, a point where the central bank stops injecting liquidity into the financial markets via large-scale asset purchases.
Following a long period of accommodation by the Fed, markets will need to adjust to this environment of reduced liquidity. It should be interesting, to say the least. Earlier this year, even a hint of policy tightening by then newly minted Fed Chair Janet Yellen sent the markets roiling.
Can we expect an even larger reaction when QE actually ends? Time will tell.
Victor K. Lai, CFA
This blog is for informational purposes only. Nothing on this blog represents advice. Investing is inherently risky and involves the potential for loss. Victor Lai does not own any of the securities referenced in this posting. Clients of Bellwether Capital Management LLC may own shares of the securities referenced in this posting.