After phasing down its quantitative easing (QE) program all year the US Fed has finally ended it. Monetary tightening still looks unlikely until mid-next year at the earliest and is contingent on further improvement in the economy and higher inflation.
QE has worked – the US economy is now well into expansion mode and looking a lot stronger than Europe and Japan that have taken longer to adopt it.
While the ending of QE could contribute more volatility to shares it has largely been anticipated. With the US likely to continue growing & monetary conditions expected to remain easy for some time to come the cyclical bull market in shares likely has further to go.
The ending of US QE is also positive for Australia as it is a sign that the world’s biggest economy is better and removes a source of upwards pressure on the $A.
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