Tags: Sonders | QE | Fed | market

Schwab's Sonders: Good Riddance to QE

By    |   Thursday, 06 November 2014 11:44 AM

The Federal Reserve announced an end to its latest round of quantitative easing (QE) last month, and Liz Ann Sonders, chief investment strategist at Charles Schwab, is happy to see it go.

"I have been of the view, and the consensus within Schwab and the view of Chuck himself, [is that] although the early round or rounds of QE were absolutely justified — it was the shot of adrenaline to a patient in trauma — the latter rounds are a little more questionable," she said at a conference this week, CNBC reported.

While she acknowledged that the first two rounds of QE helped the economy and markets, the third round displayed "the law of diminishing returns."

The Fed bought $85 billion of bonds a month last year until it began tapering in December. That's "when you started to see lending growth pick up and confidence improve," Sonders stated.

So "you could argue the latter stages of this dented confidence."

The Fed has built up a $4.5 trillion balance sheet through QE, so the next big question is "can the Fed unwind this balance sheet in a manner that is not hugely disruptive to the markets?" Sonders said.

Former Fed Chairman Alan Greenspan apparently doesn't think so. In an appearance last week, he was asked if the Fed can withdraw from its easing without causing a crisis in financial markets, MarketWatch reported. He said he doesn't like the word "crisis" but "turmoil" fits the bill.

"I don't think it is possible" to avoid turmoil in the markets, Greenspan said.

Meanwhile, Sonders is bullish on stocks, the economy and the dollar. "We're in the next phase of the economic recovery, which will be more investment-driven through capital spending," she said.

"The dollar is in a new sustained bull market that has as its underpinning factors that are also supportive of the bull market. We're in an environment now that is very similar to the mid-1990s. The hope, of course, is that it doesn't end like the late-1990s — in a speculative blowoff top."

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The Federal Reserve announced an end to its latest round of quantitative easing (QE) last month, and Liz Ann Sonders, chief investment strategist at Charles Schwab, is happy to see it go.
Sonders, QE, Fed, market
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2014-44-06
Thursday, 06 November 2014 11:44 AM
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