Shortly before his retirement Mervin King the last Governor of the Bank of England explained that as a result of central bank policy investors had experienced lower returns however this was offset by a rise in asset prices. In other words reduced yield creates capital gains. This in many respects is true however the distribution of losses in income and gains in capital are not equally distributed across investors. In the short run investors in cash are losers and those in bonds and equities gain. However, both to the detriment of bond and stock investors extended low rates mean redemptions and dividends attract lower reinvestment rates too. What happens when rates rise? It’s easy to see returns on cash improve but what about bonds and equities? Bonds lose money. The extent of the losses being a reflection of duration. For equities it’s harder to say. Do rising rates increase the discount on future dividends or are rate rises a reflection of economic growth which should be good for earnings and dividends? This remains conjecture. What is certain is that that normalisation will leave many investors worse off under QE than they would have been without it. The net beneficiaries will have been borrowers and in particular credit worthy governments. To avoid the bear trap you need to get the market timing right. In this environment it means guessing policy action. “Guess” is the best description and it’s something we should feel uncomfortable about because it’s speculation. In other words another group of beneficiaries from QE will be speculators who by luck or judgment just get to the exit before the crowd.