S&P 500 — Technical QE vs. Classic QEThe US Federal Reserve (FED) unveiled yesterday its final monetary policy decision of the year with an interest rate cut on the federal funds rate to 3.75%. Jerome Powell held a press conference and the FED updated its macroeconomic projections for 2026.
There is now a complete balance between the unemployment-rate objective and the inflation objective. Let us also keep in mind that the Quantitative Tightening (QT) program has been halted since Monday, December 1st, and that the FED stands ready to use the balance-sheet monetary tool to reduce any emerging tension in the interbank and money markets and to ensure that bond yields do not exert pressure on the State and on companies.
While the S&P 500 index is evolving at record levels and one must justify a valuation level at a historic high, would a “technical QE” from the FED during 2026 be sufficient to contain long-term interest rates and support the equity market?
It is essential to understand that a “technical QE” is not a classic Quantitative Easing (QE) program and that its impact on long-term interest rates remains limited. In that sense, a technical QE does provide short-term liquidity, but it does not constitute a structural liquidity support.
Concretely, a technical QE mainly aims at stabilizing the functioning of the money market: repo operations, temporary balance-sheet adjustments, targeted interventions in case of stress. This prevents short-term rates from suddenly spiking, but it does not mean that the FED is entering a large-scale easing cycle. Investors should therefore avoid overinterpreting the term “QE.” Here, the objective is operational, not macroeconomic.
Where a classic QE compresses the entire yield curve, stimulates credit and fuels a genuine cycle of risk appetite, a technical QE acts more like a “shock absorber” than an engine. It prevents a liquidity crisis, but it does not create a new structural momentum. For an equity market already at historical highs, the nuance is essential.
Should it be minimized for all that? Not really. In an environment where valuations are very high in the US market and where the slightest stress on rates can trigger sharp profit-taking, the simple ability of the FED to intervene surgically to calm markets can be enough to maintain a climate of confidence. A technical QE is not fuel for a new bullish leg, but it can prevent turbulences that could weaken US indices.
In summary, while a classic QE creates an expansionary environment, a technical QE mostly creates a stable one. And for an S&P 500 sitting at record highs, stability may already represent a meaningful form of support.
DISCLAIMER:
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only. The presented idea (including market commentary, market data and observations) is not a work product of any research department of Swissquote or its affiliates. This material is intended to highlight market action and does not constitute investment, legal or tax advice. If you are a retail investor or lack experience in trading complex financial products, it is advisable to seek professional advice from licensed advisor before making any financial decisions.
This content is not intended to manipulate the market or encourage any specific financial behavior.
Swissquote makes no representation or warranty as to the quality, completeness, accuracy, comprehensiveness or non-infringement of such content. The views expressed are those of the consultant and are provided for educational purposes only. Any information provided relating to a product or market should not be construed as recommending an investment strategy or transaction. Past performance is not a guarantee of future results.
Swissquote and its employees and representatives shall in no event be held liable for any damages or losses arising directly or indirectly from decisions made on the basis of this content.
The use of any third-party brands or trademarks is for information only and does not imply endorsement by Swissquote, or that the trademark owner has authorised Swissquote to promote its products or services.
Swissquote is the marketing brand for the activities of Swissquote Bank Ltd (Switzerland) regulated by FINMA, Swissquote Capital Markets Limited regulated by CySEC (Cyprus), Swissquote Bank Europe SA (Luxembourg) regulated by the CSSF, Swissquote Ltd (UK) regulated by the FCA, Swissquote Financial Services (Malta) Ltd regulated by the Malta Financial Services Authority, Swissquote MEA Ltd. (UAE) regulated by the Dubai Financial Services Authority, Swissquote Pte Ltd (Singapore) regulated by the Monetary Authority of Singapore, Swissquote Asia Limited (Hong Kong) licensed by the Hong Kong Securities and Futures Commission (SFC) and Swissquote South Africa (Pty) Ltd supervised by the FSCA.
Products and services of Swissquote are only intended for those permitted to receive them under local law.
All investments carry a degree of risk. The risk of loss in trading or holding financial instruments can be substantial. The value of financial instruments, including but not limited to stocks, bonds, cryptocurrencies, and other assets, can fluctuate both upwards and downwards. There is a significant risk of financial loss when buying, selling, holding, staking, or investing in these instruments. SQBE makes no recommendations regarding any specific investment, transaction, or the use of any particular investment strategy.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts suffer capital losses when trading in CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Digital Assets are unregulated in most countries and consumer protection rules may not apply. As highly volatile speculative investments, Digital Assets are not suitable for investors without a high-risk tolerance. Make sure you understand each Digital Asset before you trade.
Cryptocurrencies are not considered legal tender in some jurisdictions and are subject to regulatory uncertainties.
The use of Internet-based systems can involve high risks, including, but not limited to, fraud, cyber-attacks, network and communication failures, as well as identity theft and phishing attacks related to crypto-assets.
