As was widely anticipated, today the Federal Reserve announced the end of its massive bond-buying program. The Federal Open Market Committee (FOMC) announced that it would no longer purchase mortgage-backed and Treasury assets, also known as quantitative easing (QE), although it did so basically by omission.
While I think the Fed getting out of the money-printing business is a good thing for the overall health of the economy, when it comes to the short- and medium-term effect on the equity markets, things may not be so healthy.
Consider that since the Fed began the original QE in December 2008, stocks have risen substantially throughout every round of easing. Unfortunately, when the different phases of quantitative easing have ended (QE1, QE2, Operation Twist), stocks have suffered a substantive sell-off.
Read more about the impact of the Fed’s ending of quantitative easing at Eagle Daily Investor.
