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Fed's QE Infinity Will Drive A Flight To Yield

Published Thu, 06 Jun 2019 11:54:14 -0400 on Seeking Alpha

The Federal Reserve is starting to face pressures from the trade war and it's obsession with preventing markets from any correction. Jerome Powell likely facing political pressure stated:
We are closely monitoring the implications of these developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion, with a strong labor market and inflation near our symmetric 2 percent objective.
Powell was appointed by Trump and is likely facing pressure to restart quantitative easing and cutting rates. I believe this is happening because in the short term it will boost the markets and economy. Trump wants this to help his re-election chances.
The Fed likely realizes higher interested will balloon interest on debt payments. 2019 is expected at $383 billion and in 10 years nearly a trillion a year assuming no rate changes. Unless inflation picks up, the Fed could manage low interest rates similar to the Bank of Japan.
I project a drop in interest rates on the 10 year to 1% as the Fed will replace mortgage backed securities with treasuries. The drop in rates will remain higher than most developed economies like Japan or Germany. Long term government debt like (TLT) is a strong short term play as bond prices continue to rise as the rates drop. Short term rates will have to drop as the 10 year currently yields .2% less than the 3 months.
How this will play out into equities? A continued drop will force many to chase yield.
Data... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
AT&T 38.38   16.1 2.38 2.04 5.43
PHYSICIANS REALTY TRUST 17.27   61.7 0.28 0.92 5.36
VERIZON COMM 60.43   15.8 3.83 2.46 4.04
VANGUARD HIGH DIVIDEND YIELD ETF 89.75   0.0 0.00 0.00 2.79
VANGUARD TOTAL BOND MARKET ETF  

AT&T - T
AT&T - T  


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