Quantitative easing provides liquidity to banks and institutional investors, which have to invest it, and it drives down nominal interest rates to a level far below the nominal growth rate. Without ambiguity, this drives up equity and property prices, which we are seeing now.
This central bank policy is understandable in the United States, the United Kingdom and Japan where wealth effects are strong, but not in the euro zone where they are absent.
Combined with the fall in the oil price and the deprecation of the euro, this policy will in all likelihood drive euro-zone investors to invest in equities, but they should keep in mind that euro-zone growth probably will benefit little from quantitative easing and that their strategy therefore must be reversible.
