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How the Market Works

Central Bank Stimulus ‘R Us

Posted by kdadmin on November 21st, 2014.

I like charts because they can reduce complex financial rhetoric down to a single, ten second glance. Have a look …

Over the last five year, SPY’s growth rate has dwarfed that of the Eurozone and China. An ETF of the American S&P 500 (SPY) is represented in blue. A similar ETF for the Eurozone (VGK) is in orange, and another for China (MCHI) is in red.

Spy Eurozone China 5 Years

Grumble all you want, but being the global guinea pig of a torrential monetary policy stimulus (at the hands of the Federal Reserve) has put the USA in an incredibly favorable global position. Unemployment rates, corporate profits, interest rates, inflation, tax levels, currency values, and even housing starts are all pointing in the right directions. Compared to the carnage in the rest of the globe, we’re sitting pretty.

So pretty, in fact that the president of the European Central Bank (Mario Draghi) has implied a willingness to move in the same direction, and China has made similar moves by lowering certain key rates.

Is it too little, too late? Maybe.

But, it may also signal a good time to take a small stake in, at least, the Eurozone. We’ll see. Only time will tell.


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