What we never understood is the concept that QE reversal would not slow the economy in the same way that QE was able to help grow it. We have read estimates showing that $600 billion of annual bond sales is equivalent to a 75 bps rate hike. Whether this number is accurate is not as important as the concept…you recognized and admitted that QE reversal was a headwind to the economy, and your recent policy stance that your “most favored plan is to stop the portfolio run-off” by the end of 2019 makes a lot of sense. The FED’s actions went from creating price instability to price stability almost overnight. Last week’s minutes suggested that you might start the treasury purchases again in 2020. While this came as a surprise, until we learn more, I’ll reserve comment.
Mr. Chairman, members of the FOMC, we thank you. Yours is a thankless and endless job that effects all Americans, and the world’s investors, alike. Please know we appreciate the flexibility, timeliness and appropriateness of your actions. While it is without precedent, it is most welcome.
David M. Haviland
Portfolio Manager and Managing Partner
Beaumont Capital Management (BCM)
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