“There can be no question that a big change in monetary policy, like the withdrawal of QE will have huge implications for global markets, not least because all the money sloshing around has had a significant impact on some sectors which would otherwise have remained somewhat lacklustre,” said James Humphreys, investment manager at Duncan Lawrie Private Bank.

With the US announcing plans to cut back its QE programme and recent figures in the UK indicating a stronger economy with less need for further QE stimulus, investors who went in search of high yield returns in recent years to combat the low rates payable in cash may now see their investment plummet as liquidity in some markets dries up and the high yield bubble bursts, the firm said.

“Evidence of the potential threat facing UK investors can be seen in the US where all signs point to QE starting to be tapered.  One example in particular is the US corporate high yield market, which is made up of the bonds issued by sub-investment grade corporations – otherwise known as ‘junk’ bonds. The amount of liquidity poured into the economy has meant that this market has benefitted from much greater demand than it would have had otherwise and in effect it is keeping certain corporations alive that would have faltered,” said Humphreys.

“The global QE environment has ultimately forced UK retail investors to play with fire as low returns on cash and high quality fixed interest securities force them to naively take more risk with their capital in the search for a reasonable income. However, many retail investors are taking on risk that they simply cannot afford or do not understand and not only will they suffer, but so will the long term economic prosperity of the UK,” Humphreys concluded.