From macro to micro
As the chart above clearly shows the market response to monetary policy impulse has become Increasingly short lived with each episode. While the first batch of quantitative easing (QE) had a large impact on what could be characterised as a binary situation in early 2009, subsequent easing programmes have generated shorter and shallower equity market rallies. According to a Fidelity Worldwide Investment white paper, From top to bottom – macro uncertainty and the reassertion of fundamentals, while there is still scepticism that such policy is able to underpin growth, especially given the fiscal environment, investors have been comforted by central banks’ long term signalling to keep policy loose for as long as it is needed. Such signalling facilitates a shift in the limelight away from monetary policy. Fidelity said this trend is evidence of investors beginning to move away from being driven by top-down, macro events towards looking at bottom-up, micro events.
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