Start of Quantitative Easing.
On Tue November 25, 2008 Federal Reserve announced the purchase of direct obligations of housing-related government-sponsored enterprises. The program included the purchase of up to $100 billion in GSE direct obligations and purchase of up to $500 in MBS. The S&P500 closed at 851.81 on Nov 24, 2008 (the low was 741.02) and ts performance during the coming year was:
| 1 Week | 816.21 | (4.2)% |
| 2 Weeks | 909.70 | 6.8% |
| 4 Weeks | 871.09 | 2.3% |
| 3 Months | 773.14 | (9.2)% |
| 6 Months | 910.33 | 6.9% |
| 9 Months | 1025.57 | 20.4% |
| 12 Months | 1105.65 | 29.8% |
The December 16, 2008 FOMC statement announced that Fed stands ready to expand its purchase of agency debt and MBS as conditions warranted.
The January 28, 2009 FOMC Statement reiterated:
“The Federal Reserve continues to purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets, and it stands ready to expand the quantity of such purchases and the duration of the purchase program as conditions warrant.”
QE1 Expansion.
In March 18, 2009 FOMC meeting Fed announced that it is increasing the size of its balance sheet.
“To provide greater support to mortgage lending and housing markets, the Committee decided today to increase the size of the Federal Reserve’s balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of agency debt this year by up to $100 billion to a total of up to $200 billion. Moreover, to help improve conditions in private credit markets, the Committee decided to purchase up to $300 billion of longer-term Treasury securities over the next six months.”
On March 17, 2009 the S&P500 closed at 778.12 and its performance during the coming year was:
| 1 Week | 806.25 | 3.6% |
| 2 Weeks | 797.87 | 2.5% |
| 4 Weeks | 852.06 | 9.5% |
| 3 Months | 910.71 | 17.0% |
| 6 Months | 1065.49 | 36.9% |
| 9 Months | 1096.08 | 40.9% |
| 12 Months | 1166.21 | 49.9% |
In April 29, 2009 FOMC meeting Fed extended the duration of the programs.
“As previously announced, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve will buy up to $300 billion of Treasury securities by autumn. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets.”
QE2 Is Coming.
In his August 27, 2010 speech, Chairman Bernanke hinted at QE2.
The November 4, 2010 FOMC statement announced the QE2:
“The Committee will maintain its existing policy of reinvesting principal payments from its securities holdings. In addition, the Committee intends to purchase a further $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month.”
On November 3, 2010 the S&P500 closed at 1197.96 and its performance during the coming year was:
| 1 Week | 1218.71 | 1.7% |
| 2 Week | 1178.59 | (1.6)% |
| 4 Week | 1221.53 | 2.0% |
| 3 Months | 1307.10 | 9.1% |
| 6 Months | 1356.62 | 13.2% |
| 9 Months | 1260.34 | 5.2% |
In Jun 22, 2011 FOMC Statement Fed announced,
“The Committee will complete its purchases of $600 billion of longer-term Treasury securities by the end of this month and will maintain its existing policy of reinvesting principal payments from its securities holdings.”
Below is the weekly $SPX chart depicting the QE timeline. Going by just this chart and not the economic conditions does it mean there is chnace for QE3?
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