Fed Announces Quantitative Easing
Balance sheet expansion begins
QE announcements (Nov 2008, Nov 2010, Sep 2012, Mar 2020) have consistently produced immediate positive equity returns. The mechanism: the Fed buying bonds pushes investors into riskier assets (the 'portfolio balance channel').
| Date | 1M return | 1Y return | 5Y return |
|---|---|---|---|
| 2008-11-25 | +1.8% | +29.5% | +110.8% |
| 2010-11-03 | +2.2% | +3.3% | +75.3% |
| 2012-09-13 | -2.1% | +16.8% | +71.5% |
| 2020-03-16 | +16.6% | +66.1% | +137.3% |
What history says
Editorial commentary written by ALAN analysts. Figures cited below are analyst-authored context — they are not derived from the chart above and may reflect different windows or sources.
Every QE announcement in US history has been followed by positive 6-month equity returns. The mechanism is liquidity injection + yield suppression forcing capital into equities.
The Fed buying $80B+ per month in bonds is the most powerful market tailwind possible. Asset allocation during QE should tilt toward risk assets — fighting this flow is expensive.
QE doesn't just lift stocks — it compresses yields across all markets, pushing up home prices, commodities, and credit. This has distributional consequences worth discussing with clients.
Liquidity injections at this scale have historically lifted risk assets broadly, so the practical review is whether you are inadvertently underweight: cash accumulated during the preceding stress now earns a suppressed yield while the policy tailwind favors invested capital. Rebalancing promptly back to full equity targets has historically beaten waiting for a better price.