Quantitative studies on the impact of expansions of the U.S. Fed Balance Sheet on various equities confirm this observation: most stocks that predictably respond to increases and decreases in the U.S. Fed Balance Sheet, do so prior to the announcement of actual changes to the Balance Sheet, supporting the “buy on rumor, sell on fact” investing styles. Yet, investors wanting more certainty can hold off until after a balance sheet announcement is made: a selected group of equities tends to respond with a 99.9% probability to expansions and contractions of the Fed’s Balance Sheet AFTER the changes to the Balance Sheet are announced.
In particular, healthcare stocks tend to rise following quantitative easing decisions. Companies like Aetna Inc. (AET), Cigna Corporation (CI), Covidienplc (COV), Quest Diagnostics Incorporated (DGX), United Healthcare Group (UNH), Wellpoint (WLP), and the healthcare sector ETF (XLV) consistently rise after the announcement of the Balance Sheet expansion is made, as do selected technology companies like IBM (IBM), Microsoft (MSFT), and Rambus Inc. (RMBS). Retailers and grocers also appreciate in response to increases in the Balance Sheet (notable examples include The Kroger Co.: KR, Supervalu Inc.: SVU, and Safeway Inc.: SWY).