In this video, American Century CEO Jonathan Thomas discusses how the Federal Reserve’s quantitative easing (QE) has created an “artificial environment” by cutting volatility. Now, with QE in the rearview mirror and the Fed poised to begin hiking interest rates, volatility will increase, and that will provide opportunity for active investment managers.
Many active managers have found it difficult to beat the S&P 500’s returns while the Fed’s ample liquidity has guided the market average consistently higher. Mr. Thomas says stocks have been moving “irrespective of fundamentals,” but with the Fed’s change in policy, this will no longer be the case. Volatility has already become more pronounced since the Fed terminated QE in October.