Fed & Macro
Quantitative Easing
The Fed buying bonds to inject liquidity and push down long rates, a tailwind for risk assets.
Also known as: QE, Asset Purchases
- What it is
- Quantitative easing is the Fed's purchase of Treasuries and mortgage-backed securities to expand its balance sheet and lower long-term rates. It adds liquidity when short-term rates are already near zero. It is the opposite of quantitative tightening.
- What it does
- QE lowers discount rates and floods markets with liquidity, historically supporting equities, credit, and long-duration growth assets. The mere signal of resumed purchases can lift risk appetite. Investors position for the liquidity regime it creates.
- The evidence
- Rounds of QE coincided with multi-year rallies in equities and compression in credit spreads and long yields.
- Best for
- Long-duration growth (XLK, QQQ), credit and bond proxies (LQD, TLT).
- Pairs well with
- quantitative-tightening, fomc, federal-funds-rate
- Use cautiously with
- Correlation is not mechanism; crediting every rally to QE ignores earnings and other drivers.
- Cautions
- QE is typically a crisis tool, so its arrival often accompanies bad news that first roils markets.
General information, not medical advice. Ingredient effects vary by formulation, concentration, and skin. Patch-test new actives and consult a qualified provider before starting prescription ingredients.
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