Re:Apple becomes first U.S. company to reach a $2T market cap
by microcow on Wednesday August 19, 2020 @02:45PM
(#24214404)
I'm not confident about the 2008-present effects of QE, but I think it's more likely to affect stock and bond prices than Baby Boomers retiring.
The announcement of the most recent round of QE is one of the "policy shocks" of the kind referred to by the 2014 Fed paper. Prior to the announcement, Apple, S&P 500, and bond funds were at 1-year lows. This month they are at all time highs.
I question the validity of this hypothesis, at least in so far that it has a predominant or even major effect:
* https://www.youtube.com/watch?v=K3lP3BhvnSo&t=8m50s
The video cites an US Fed paper on the subject (see Section 3):
* https://www.federalreserve.gov/PUBS/ifdp/2014/1101/ifdp1101....
It's mostly "policy shocks" / surprises that cause changes in bond rates, which may have knock-on effects to other asset classes.
Indexes have gone up and up and hit all-time highs regularly over the decades on their own: there's no need to throw QE magic pixie dust as a cause.
Further, in the past, a much smaller percentage of the population probably had equity ownership: as pensions have given way to private retirement funds (401(k) in the US), and so you have people buying the S&P 500 in their Vanguard accounts.
On the flip side, you have a large population cohort (Baby Boomers) entering retirement age, and they want safer asset classes so are going after bonds, driving down yields. With yields getting lower, anyone who wants returns is stuck with equities.
So you have one group of people bidding up equities for growth towards retirement, and another group bidding down bonds for safety in retirement.