Did the Fed just restart QE?

Lost in all the focus on trade last week was a pretty significant move by the Fed, as the Fed announced a plan to begin buying Treasury bills every month, a move that prompted several financial news sites and analysts to declare that “QE” is back. But while the plan does underscore that the Fed is getting more accommodative, and the move by the Fed might be positive for one sector, it’s not a new QE program and the new Fed policy won’t create a new tailwind for stocks in our opinion. 

Regarding what was announced, the Fed unveiled a plan to begin buying $60 billion per month of Treasury bills (so maturities less than one year) in a move that is specifically designed to prevent the type of repo rate spike we saw in September and ensure adequate short-term liquidity for the banking system.  

Now, I admit that buying bonds to push interest rates lower does sound very “QE-esque.” So, in some ways, this move by the Fed is technically QE, but the name isn’t really what’s important—it’s the impact on markets that matters to us. 

From an academic argument standpoint, the “QE vs. Not QE” debate is notable. For those of us in the real-world QE only matters if it makes stocks go up, and in this case, the new plan by the Fed, while technically QE, won’t make stocks go up like we saw from ’10-’15. 

Here’s why: