Equities for For Days 

 Two weeks ago the Switzerland National Bank(SNB) blindsided the global economy by abolished their monetary policy of a currency cap on the Euro. The ending of the policy was not the shocker it was that they did it practically unannounced.  This was a program created three years ago in the middle of economic turmoil in Europe with Greece and the strength of the Euro falling. The program created by the Swiss National Bank was a policy of printing Francs at the same rate of euros being printed to keep the currency rate of Franks/Euros constant. The policy created a safe haven for investors in the Swiss frank and helped the European economies stabilize. The surprise to drop the currency cap was a shocker and came without warning. Within hours of the announcement the euro had fallen almost 20% against the frank as illustrated in the chart of EUR/CHF. Provided by TD Ameritrade. 

The move has been speculated to be a preparation for the possibility of an upcoming European Central Bank Quantitative Easing program where the ECB would be printing Euros to buy bonds on the secondary market and attempt to stimulate the economy. The printing of Euros would devalue the currency and if the currency cap were in effect then the Swiss Nat. Bank would also have to match the amount they print to keep the two currencies equal. 

      The Swiss were correct in thinking the ECB would be implementing a Q.E program because last week the European Central Bank announced a 1.1 trillion euro asset purchase program. The ECB took a lead from the Federal Reserve as they are the kings (Now Queens) of Quantitative Easing. This funny picture is an analogy of this concept and illustrates Janet Yellen of the Federal Reserve handing the Q.E baton to Mario Draghi the head of the European Central Bank. 

 Since the collapse of the Sub Prime bubble in 2008 the Federal Reserve has been pumping money into our economy by the billions each quarter. The policy was effective as the American economy improved. This is shown in a the graph provided of the S&P 500 since 2008, with Bollinger Bands. As you can see the Federal Reserves policy has been quite effective. 

The general Economic theory around Q.E is that when the Economy improves that the Federal Reserve should pull back and end Q.E, this happened in 2014, but the Fed has other tricks up its sleeve. Along with Quantitative Easing the Fed can fix the interest rate on loans to manipulate credit cycles. Along with Q.E the Fed has kept interest rates near zero for almost six years. Economic theory says that now the policy should end as we have improved. The Federal Reserve had a meeting Wednesday where it was expected to do just that, they would announce that they would be raising interest rates early in 2015. The announcement by the ECB however caused Janet Yellen and the board of the Federal Reserve to rethink the rate hike so at the meeting on Wednesday they announced that rate hikes would not occur until at least July and many investors believe it wont actually happen until fall. The Federal Reserve knows there is turmoil in the markets and will be keeping a close eye on the global economy for the foreseeable future.