One of our favorite strategists, SocGen’s Andrew Lapthorne, has penned an interesting piece looking at a core distinction between the US and Japanese QE, and how the former will ultimately prove “toxic” whereas Japan’s monetary experiment, while just as unprecedented, will confine its damage largely to the central bank’s balance sheet.
Lapthorne starts off by reminding readers that since equity markets peaked in June 2014, UK and Eurozone equities are down by 27% and 20% respectively in US dollar terms based on MSCI indices. In sharp contrast the US is up almost 10% and Japan has risen 6%. He then points out that “the resilience of US and Japanese equity markets will be, in part, down to QE and other central bank policies influencing the equity market. Some see this as a success;we, on the other hand, are worried about its consequences.”
The reason why the SocGen strategist is worried, is because while the mechanisms by which BOJ and Fed money printing find their way into the equity market appear similar, in reality “they are not”, and thus the end game to QE may have very different outcomes.
This post was published at Zero Hedge on Oct 25, 2016.
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