The Great Global Policy Rotation
The monetary stimulus and fiscal austerity of recent years appear to be undergoing role reversals. As quantitative easing (QE) decelerates and fiscal stimulus accelerates around the world, investors should reconsider their asset allocations.
  • One way to gauge QE, a monetary policy, is to measure the change in central bank assets. A slowdown in global central bank asset growth is underway, a clear sign that QE is slowing (see chart above).

  • At the same time, fiscal policy is exiting the era of austerity that began after the Global Financial Crisis. More developed countries around the world are enacting expansionary fiscal policy than contractionary policy right now, a dramatic change from just a few years ago.

  • As QE bond purchases give way to fiscal stimulus and bond issuance, bond yields will likely move higher. Higher bond yields may end the outperformance of bond-like stocks. Equity investors may instead find attractive returns in stocks that exhibit strong fundamentals and growth potential.​​

The views expressed are the views of Fred Alger Management, Inc. as of July 2017. These views are subject to change at any time and they do not guarantee the future performance of the markets, any security or any funds managed by Fred Alger Management, Inc. These views are not meant to provide investment advice and should not be considered a recommendation to purchase or sell securities.

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