, Columnist
Markets Are Trapped as Policy Experiments Collide
Unconventional monetary policy is reversing at the same time as a bold and risky fiscal spending plan is being enacted.
It may only get worse.
Photographer: Bryan R. SmithThis article is for subscribers only.
The wide swings in equity prices recently and the rise in bond yields may just be a prelude of what's to come as 2018 shapes up to be a very challenging and volatile year for investors.
Two radical policy experiments are colliding, as unconventional monetary policy accommodation that led to near-zero official interest rates and record purchases of debt securities is reversed at the same time as a bold and risky fiscal spending plan is being enacted. The net effect should be a major shift in liquidity flows with more money being directed and used in the economy, leaving less liquidity -- in the form of higher interest rates and fewer new flows -- for the financial markets.