Iniohos Advisory Services - Who says that QT will have a larger impact on financial markets than QE?

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Iniohos Advisory Services

John Galakis ...

Nicolas Skourias

EUR 23.35 For Business Accounts Only

Who says that QT will have a larger impact on financial markets than QE?

The recent rise in equity volatility has been largely attributed to the Federal Reserve’s policy normalization and the unwinding of the unconventional monetary policy tools that it deployed since the outbreak of the Global Financial Crisis (GFC) in specific. The pace of the Federal Reserve’s balance sheet reduction or quantitative tightening is a closely watched metric, as investors fear that it will have a significant impact on market liquidity.

Recent comments by Federal Reserve officials regarding the mechanics of quantitative tightening seem to have had a material, but short-lived, impact on financial markets. Thus, there seems to be specific investor focus on quantitative tightening related developments. It is only rational that as quantitative easing had a positive impact on market liquidity and managed to bring down risk premia and volatility in general, investors are worried that quantitative tightening will have the opposite effect.

We have been arguing for some time that it is rather unrealistic to assume that the effect of quantitative tightening will be symmetric or analogous to that of quantitative easing for a variety of reasons...

31/01/2019 3 EN

Provider

Iniohos Advisory Services

Iniohos Advisory Services is an independent investment research and consulting house, founded by investment professionals with long and in-depth experience in global financial markets.

Iniohos Advisory Services aims to provide top-end investment solutions to High Net Worth Individuals and institutional investors, ranging from proactive investment research to tailor made financial and risk modelling.

Our research covers the areas of investment and macroeconomic research, investment strategy and asset allocation, financial modelling and risk management.

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Analysts

John Galakis

Nicolas Skourias

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Who says that QT will have a larger impact on financial markets than QE?

U.S. recession expectations: where do we stand?

Is the U.S. marketâ€™s steady outperformance about to turn?

U.S. equities should bottom 2-quarters before real GDP growth!

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