What Will Happen to the Markets When QE Ends?

Last week’s market reaction to Fed Chairman Bernanke’s suggestion that the FOMC might begin to taper back QE “within a few meetings” represented a trial run for what might happen when central bankers really do remove the punch bowl at some point in the future. The largest reaction came in the most leveraged markets (notably the Nikkei, which fell by 6.5 per cent), but there were simultaneous across-the-board declines in global bonds and equities.