If QE Was Withdrawn....

A_Flock_Of_Sheep

If QE Was withdrawn with immediate effect tomorrow how much do you think the markets would fall?

It seems the markets are propped up by investors riding the Equity QE gravy train and at a slight sniffle from the USA that QE may be tapered down people are selling off and it has had an effect.

If it was removed totally my prediction would be a 35 to 40% drop in the markets.

marathonic

As is happening now, the mere thought of QE being withdrawn is resulting in downward pressure.

Such an announcement is unlikely to be made so abruptly and it'd probably be a gradual process.

The total falls from peak to trough based on complete withdrawal of QE may be 20%+, but I'd imagine it'll happen gradually.

bigadaj

But it's not going to be, at worst this will get unwound over several years and it may never need to be.

Bottom line is where else are you going to put your money, if dividends were low and P/E ratios high then you might have a point, as it is equities are the only game in town, and are likely to be for some time, probably years.

Look at property, that is far more reliant on cheap money. Understand able that given many are in or near to negative equity then a correction fo say 20-30% in house prices would be politically disastrous, but from zero interetst rates, to qe and now into funding for lending and government gifted deposits there seems no end to the lengths the government will go to keep house prices artificially inflated.

A_Flock_Of_Sheep

Do people think we are imminently heading for an extreme major crash in the markets such as the one in 08/09 the financial crisis?

marathonic

A_Flock_Of_Sheep wrote: »

Do people think we are imminently heading for an extreme major crash in the markets such as the one in 08/09 the financial crisis?

If we knew that, we'd be shorting like crazy and buying back at lows.

I know your question said 'think' so I'll give my personal opinion - the big fear you referred to above is that QE is completely withdrawn.

There were some good news headlines last week which raised the question of how much longer QE is needed for considering the improving US economy.

Hence, the news headlines seem to be asking the question of "will QE be withdrawn in the short term due to a significantly improving economy" rather than "will QE be withdrawn for no apparent reason resulting in another recession".

With the above in mind, I'd say the pullback will be 10% tops - and probably less. I'd be surprised to see a 15% pullback to be honest.

Old_Slaphead

A_Flock_Of_Sheep wrote: »

Do people think we are imminently heading for an extreme major crash in the markets such as the one in 08/09 the financial crisis?

No.

QE will not be reversed until growth returns so the money slushing round the system will remain.

Employees in UK are being pushed into autoenrolement so more funds will be enering the market over the next few years - they (and consequently any government that wants to get reelected) will have a vested interest in seeing a stable stockmarket.

If you take money out of the stockmarket what is there to do with it that will achieve a half decent return?

FatherAbraham

Old_Slaphead wrote: »

If you take money out of the stockmarket what is there to do with it that will achieve a half decent return?

Bank deposits would be a great place to get a good relative return, if one knew that equities were going to fall.

I have no idea whether, or when, the equity market will crash, but I do know that the equity market is full of yield-chasers who shouldn't be there. People who've become sick of negative real returns on their cash deposits, and have irrationally allowed their loss aversion to override their risk aversion.

Since they can see wonderful returns (20% up since 1st January!) in equities, while their bank deposits give a percentage point or more below the inflation rate, they've entirely forgotten their need to look after their capital base.

Some vulnerable but imprudent people are going to be taught a very harsh lesson if the stock market "corrects".

Warmest regards,
FA

jabba42

FatherAbraham wrote: »

Since they can see wonderful returns (20% up since 1st January!) in equities, while their bank deposits give a percentage point or more below the inflation rate, they've entirely forgotten their need to look after their capital base.

Some vulnerable but imprudent people are going to be taught a very harsh lesson if the stock market "corrects".

Warmest regards,
FA

Like this one, you never get rich chasing yesterday's gains.

luvpump

I doubt very much it will EVER be withdrawn ..

Glen_Clark

Warren Buffet says the suggestion of an end to QE will be 'a shot heard around the world' and is sitting on his highest ever pile of cash $49bn. But is he talking the market down before he invests in it....

N1AK

A_Flock_Of_Sheep wrote: »

If QE Was withdrawn with immediate effect tomorrow how much do you think the markets would fall?

If it was removed totally my prediction would be a 35 to 40% drop in the markets.

Very hard to say, but also entirely pointless as it won't be. The market prices will already be priced based on investors current opinion on the likelihood of QE being cut or stopped thus the stop would have to be harsher than market expectations for shares to correct for it.

If dropping QE immediately didn't decimate the economy (I'm not saying it would) then I think any immediate drop in prices would be largely reversed within a couple of weeks.