Active investors on the stock market won't like additional incentives from the Federal Reserve
Difficult times are waiting for active investors in the stock market if the Fed increases its balance sheet even more to prevent mass bankruptcies and rising unemployment, warns strategists of Sanford C. Bernstein.
According to their forecast, fresh money from the Fed is likely to provoke a new rise in the stock market, but it will be difficult for active investors to get ahead of benchmark indices. The fact is that the main priority of the regulator is to prevent mass dismissals and corporate bankruptcies, so the new stimulus, which will inevitably prove illegible, will make it difficult to "fair" valuation of individual issuers and provoke inefficient distribution of capital. All this is unlikely to allow active investors to earn more than such a passive strategy as buying index ETFs (stock exchange funds) would bring.