It is reasonable to imagine that, in announcing its intent to embark on Europe's own version of quantitative easing, the ECB anticipates a similar effect with respect to European equities. Taking into account the plan for EUR 60bn a month in purchases (beginning in March), the ECB's balance sheet expansion should look something like this:
When we overlay the MSCI Europe, we find a somewhat surprising relationship-- equities have risen as the central banks' assets have contracted over the last several years, implying that asset purchases (inverted on the following chart) could actually be negative for stocks:
We have no way of knowing for sure whether or not this pattern will hold, but this chart would seem to suggest that MSCI Europe equities could decline ~30% by the end of 2016.
