Sunday, March 13, 2016

Majority Incorrectly Believes The Fed Controls Markets

The majority believes the Fed rather than invisible hand drives markets and trends. While the Fed, unlike many of the widely-followed 'gurus' that seem to sing the same tune (market interpretation) regardless of ever changing market conditions, knows better, don't expect them to discredit this assumption until it returns to its historical role of purchasing corporate debt to relieve liquidity crunches. That won't happen until the Fed's political strings are cut. Political strings, easily attached, are rarely severed except under conditions of extreme stress. Extreme stress is generally induced by severe financial and/or economic crises.

Analysis that the Fed 'caused' 93% should be ignored as simplistic garbage.

Headline: The Fed caused 93% of the entire stock market's move since 2008: Analysis

The bull market just celebrated its seventh anniversary. But the gains in recent years – as well as its recent sputter – may be explained by just one thing: monetary policy.

The factors behind that and previous bubbles can be illuminated using simple visual analysis of a chart.

The S&P 500 (^GSPC) doubled in value from November 2008 to October 2014, coinciding with the Federal Reserve Bank’s “quantitative easing” asset purchasing program. After three rounds of “QE,” where the Fed poured billions of dollars into the bond market monthly, the Fed’s balance sheet went from $2.1 trillion to $4.5 trillion.



Market-driven money flow, trend, and intermarket analysis is provided by an Insights key.