What does the expanding US and global money supply mean to layman or retail investors ?

In recent years, every time the world economy faces a potential threat, FED and central bank dishes out Quantitive Easing (QE) or printing of money. What does this effectively mean or how does it impact retail investors like many of us here.

StashAway

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Chan Ze Ming

15 Oct 2020

Accountancy and Finance Student at Nanyang Polytechnic

Hello,

More money supply - more money in circulation - more money to spend

-inflation occurs - prices for goods goes up.

However, this time round, i think the stock market went up because people dont know where to put the money in (nth to buy due to lockdown..etc), hence, stock market is a great way to put money into.

So basically expanding money supply means more ex for everyone (imagine if everyone becomes a millionaire tmr, will prices still retain at current pricing?)

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YT

15 Oct 2020

The FED injects liquidity into the market by buying up massive amounts of government bonds. This results in a lower yield for the Treasurys (~0%).

Now, the returns investors get from the safest instruments are much lower and they may consider shifting them to other assets. If they want to remain at (somewhat) equal risk level, they can move to traditionally safe havens such as the Japanese Yen or Swiss Franc (or Gold). Alternatively, they may choose to increase the risk taken and move to riskier investments such as equities and funds.

Due to the inverse relationship between bond price and its yield, bond funds' prices increased significantly.

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