Again, I hope to get to some economic charts shortly, but
for now let’s focus on asset prices. The
Big Picture posted
some great charts on the previous QEs and Operation Twist (OT) and how
various asset classes reacted. Since I
am not sure if I can post them (please check out the link), here is summary:
- Yields. It’s interesting that yields rise after QEs. They do drop drastically before QEs though. Markets are basically buying the rumor and selling the news. The same could be said about OT, while yields have gone lower it wasn’t until earlier this year. I don’t think it was coincidence QE3 rumors started then. I can’t see a divergence between the 10 and 30 year.
- Stocks. Equity prices did rise rather nicely. However, it does appear that there is a near-term pullback in prices at first. Again, it appears investors start buying QE before it even happens.
- Commodities. Prices rise pretty much throughout QE and on the rumor. Like equities, there appears to be a selloff at the launch before a nice move higher.
One thing that jumped out was that stocks and oil didn’t
have as big a jump after QE2 as they did in Q1.
This would be concerning now given that the QE3 has already seen about
the same rise. Still, the highs and lows
are relatively subjective. Further, maybe
the open-ended nature or current economic conditions would generate higher
returns than QE2.
Gold and commodities appear to have the most upside, as rose
by close to the same amount both QEs and have barely got off the ground this
round.
