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How share market investors can play QT

By AMP Capital

“Going forward key beneficiaries of this change will be financials like global banks, more industrial and cyclical parts of the share market.”

The US Federal Reserve’s shift from Quantitative Easing (QE) to Quantitative Tightening (QT) could provide a tailwind for listed global banks, industrials and cyclical stocks, Shane Oliver, AMP Capital head of Investment Strategy and Chief Economist, says.    

The shift from the US Fed pumping money into the economy under QE, effectively sucking money out again under QT (article here) does have implications for investors, Oliver highlights.

The most obvious implication is for bond investors, Oliver notes.

“Just as QE led to a decline in bond yields, QT will lead to a rising of bond yields and that will flow globally. That means more constraints on bond returns,” he says.

When it comes to share markets, the story is mainly positive because the policy shift means the US economy is stronger which is in turn driving profits which ultimately will support share markets, Oliver notes.

Key beneficiaries during QE have been “yield plays” like Real Estate Investment Trusts and the “growth parts of the share market” like technology stocks, he says.

“Going forward key beneficiaries of this change will be financials like global banks, more industrial and cyclical parts of the share market.”

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Important notes

While every care has been taken in the preparation of this article, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455)  (AMP Capital) makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This article has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this article, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This article is solely for the use of the party to whom it is provided and must not be provided to any other person or entity without the express written consent of AMP Capital.

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