World Without Quantitative Easing (QE)

At 2:00 p.m. the federal reserve chairperson Janet Yellen acknowledged the conclusion of QE (quantitative easing) for the foreseeable future.  At one point, in the depths of madness during the past six years, the government was buying up to $85 billion a month in assets to stimulate the economy. That $85 billion a month equates to around a trillion dollars a year...
In hindsight, stocks did incredibly well with few and short duration market corrections.  But how will stocks behave after pulling liquidity. That is the question moving forward, and will the small pullbacks that we have seen over the past few years, grow into full corrections of -10% or more? Below is a chart of all the market pullbacks over the past two years.

Source: Shaw Investments, StockCharts.com

Up to this recent September pullback of -9.9%, the largest fall was -7.4% in 2013 with many small moves lower in between.

Bottom Line:  The announcement today to the conclusion of the Quantitative Easing programs is the right monetary policy for the long run. So congratulations to Janet Yellen for concluding the multiple asset bubble creating type policy that has occurred for many decades.  But, as we all know, there is "no free lunch" and we should prepare for a less liquidity fueled market ahead, with more volatility, and deeper and longer bear market corrections in the future.  Thank you for reading.
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