When one door closes…

“When one door closes, another opens; but we often look so long and so regretfully upon the closed door that we do not see the one which has opened for us.”
– Alexander Graham Bell

The prevailing wisdom on QE in Policy Bear circles has been that the Fed was” trapped” and could never exit QE without sending the US economy into a tailspin.

This week the Fed ended QE and the stock market has exploded to the upside. The one thing the policy bears may not have counted on was that someone else would cover the Fed’s back as it walked away. That someone else is the Bank of Japan, which shocked the markets this morning with an $80 trillion yen QE program that aims to triple the amount of Japanese equity ETFs and REITs it is buying on the open market. In addition, there is continued talk that the ECB will follow the Fed and the BoJ’s lead with a QE program of its own before too long.

I can’t tell you what these programs will do for the economies of these countries or for the wages and spending of their constituent workers. But it’s pretty clear what happens to their stock markets…

via the Wall Street Journal:

European stocks rose sharply Friday, tracking gains in both the U.S. and Asia, where equities were buoyed by upbeat growth data and the Bank of Japan unexpectedly announcing additional stimulus measures.

The Stoxx Europe 600 was up 1.3% by midmorning, mirroring a 1% climb on the Dow Jones Industrial Average on Thursday…

In Asia the Nikkei index closed the session at its highest level since November 2007 on Friday, after the central bank surprised investors saying it was aggressively expanding stimulus measures by bolstering asset purchases for the first time in over a year and a half.

As Alexander Graham Bell explained, when one door closes, another opens. While QE is over for now in the US, it is just getting warmed up around the developing world in many respects. Our portfolios are positioned accordingly. It helps that the assets meant for increased stimulation are almost universally cheaper than our domestic markets anyway.



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