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What Assets Perform Best During Quantitative Easing?


A look at a variety of assets to see how they responded to QEs and Twists.


The above numbers are annualized. Overall refers to the start of QE1 (November 25, 2008) to the night before QE3 (i.e. Wednesday September 12, 2012). Note commodities act very differently during QE than Twist.

Let's start off by seeing how effective QE was with respect to what the Fed was trying to accomplish. The Fed has a dual mandate of price stability and keeping unemployment low. The inflation rate during the QEs was 2.7%. That's too high.

The unemployment rate went up by 15.3% annualized during the QEs. That is also not good.

What else is the Fed trying to accomplish? Well the Fed has been buying bonds directly in an effort to stop the housing crash. Arguably one can rank lowering bond yields and raising housing prices as the No. 3 and No. 4 most important goals for the Fed. Using iShares Barclays 20+ Year Treasury Bond (NYSEARCA:TLT) as a proxy for bonds prices would suggest the Fed fails once again. Despite spending trillions on bonds, bond prices went down 9.4% on an annualized basis during quantitative easings. Why? Inflation concerns.

Quantitative easing didn't stop the real estate crash either. During QEs real estate was down 5.5% on an annualized basis.

So far the Fed is 0 for 4. What's next on their list? Probably stocks. Here the Fed finally gets on base with a 30% annualized return.
No positions in stocks mentioned.
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