End of QE May Not be Bane for Stocks Reviewed by Momizat on . Last week, Janet Yellen, the head of the Federal Reserve, announced that the Fed has ended its six year quantitative easing program. QE has played a key role in Last week, Janet Yellen, the head of the Federal Reserve, announced that the Fed has ended its six year quantitative easing program. QE has played a key role in Rating: 0
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End of QE May Not be Bane for Stocks

Last week, Janet Yellen, the head of the Federal Reserve, announced that the Fed has ended its six year quantitative easing program. QE has played a key role in driving stock market prices since the financial crisis. Many experts feared that the stock market would collapse after the Fed decided to end the program, but the Dow is still gaining value. There are a number of reasons that a stock market correction doesn’t appear to be on the horizon.

Why the Stock Market is Still Gaining Ground

A number of deficit hawks and permabears have had very strong opinions of the quantitative easing since it was initiated by Yellen’s predecessor, Ben Bernanke. They warned that pumping massive amounts of money into the economy would lead to hyperinflation as the dollar began to fall. They also claimed that the quantitative easing program would create bubbles in the financial markets, which would destabilize the economy after they burst.

However, none of these problems came to pass. The quantitative easing program hasn’t led to serious inflationary problems. In fact, economists are worried that inflation is actually too low, because it has been below 2% for the past two years.

quantitative easing program

There also don’t appear to be any serious signs that quantitative easing is creating a bubble. The International Monetary Fund warned that some foreign financial markets are exhibiting signs of bubbles, but didn’t list the U.S. equities market. Investors should be more concerned about a slowdown in the Chinese economy than a United States stock market crash.

The stock market is likely to gain ground as long as the economy remains strong. The most recent GDP report showed that the economy expanded 3.5% in the third quarter. The job market has also been strong, which is encouraging for the economy.

Major Stock Market Crash Doesn’t Seem Imminent

The stock market has been growing slowly during 2014, but most experts agree that there aren’t any signs that it will experience a catastrophic crash. The end of quantitative easing doesn’t seem to be changing that. The market is probably due for a correction at some point, but it isn’t something that investors should be alarmed about and probably won’t reflect on the end of the six-year economic stimulus program.

Investors should remain bullish and try to add new stocks to their portfolios. Tools such as  TrendsInvesting.com will help them make informed decisions that will allow them to manage their portfolios prudently in the years to come.

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Muhammad Aamir is an avid learner and online marketing consulting. Including guest blogger, blog posts sailing and link building. Social Profiles: Twitter, Facebook, Google Plus Contact: muhammadaamir2013@gmail.com

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