The End of the ECB's QE Is Bullish for Investors

In 2011, with the eurozone still recovering from 2008 – 2009's global recession, the ECB hiked rates twice—only for the economy to fall back into recession again as the eurozone's sovereign debt crisis erupted. Many deemed the hikes a monetary mistake. With eurozone GDP growth easing to its slowest rate of this expansion in Q3, some worry the ECB's move to reduce monthly asset purchases to €15 billion in October—and plans to end the program after December—are similarly ill-timed. If the ECB stops its monetary support, doesn't that increase eurozone economic risks? In our view, no. Contrary to popular belief, we think the ECB's eventual exit from quantitative easing (QE) should help, not hurt, the eurozone's loan growth and economy—a positive surprise for eurozone stocks.