Financial Advisor Explains Fed Moves On QE3

Delta Trust Investments financial advisor Chad Carlson says the Federal Reserve’s third round of Quantitative Easing (QE3) is an effort to boost hiring, but it will impact fixed income investors.

On the latest edition of Talk Business, Carlson said that QE3 is an effort to keep interest rates low for a long duration in order to encourage business investment, improve the housing market and lower unemployment.

“What I read to be the biggest difference is that they’re forecasting that not only is their objective to keep interest rates low for a while, but they’ve also said after the recovery has taken place, the objective here is to help with housing and put people back to work,” said Carlson.

Last week, the Feds announced the third round of Quantitative Easing, a policy that, in part, calls for the central bank to purchase mortgage-backed securities at a pace of $40 billion per month.

“To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens,” the Federal Reserve said in its announcement.

Carlson said it remains to be seen if the third effort to jolt a stronger economic recovery will work. He said that for fixed income investors, particularly retirees, the low interest rate environment could cause hardship.

“Investors that are looking for investments in fixed income are struggling right now,” Carlson said. “Those who have traditionally put money in CDs or put money in bonds they’re really struggling to find fixed income investments that pay a rate of return that will give them a real return on their money.”

Carlson also discussed forthcoming 401(k) disclosure changes. You can view his full interview below.