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Why has the stock market rallied so strongly? Here’s an answer.
We have seen the biggest stock market rally in history over the last 6 months, all the while, the economic fundamentals continue to fall apart. ZeroHedge.com has a pretty good answer for why it’s happening as discussed in Correlation Of S&P 500 Performance With Fed Monetization Activities Since Start Of QE:
My Comments: The Fed, and more recently the Treasury, have recently announced that they will end QE and stimulus programs in October now that we are out of recession and in recovery. Perhaps the stock markets will hold up for a while (though we are kind of due for a correction), since we should continue to see improved GDP numbers for the 3rd quarter of this year, but the 4th quarter numbers may not be so pretty. It’s likely the Q4 retail numbers and consumer spending numbers will be abysmal. We don’t expect the stock markets to hold up past Jan/Feb of 2010, at the very latest. After the next crisis/crash/correction in equities markets we’re willing to bet that the American taxpayer will be strapped with billions trillions more in stimulus, bailouts and Quantitative Easing. Read additional analysis on this chart over at ZeroHedge.com Please Spread The Word And Share This Post
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If a severe correction happens before we head into the holiday season (as Faber predicts) that will have an even greater impact on consumer spending in the 4th quarter (which, of course you point out was shaping up to be horrible anyway). Strap on your seatbelts baby. We may be in for a seriously bumpy ride for a while.
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When Dow reaches 100000, it’s over. Period. 90 degree of falling will be the next step toward ……use ur imagination…
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I only hope that when it happens the majority of Americans be informed enough to reject the “solution” the designers of this crisis will propose as the only way out.
Where is Benjamin Franklin? (colonial script, “you have a republic if you can keep it”, etc.)Â
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When I go to Lowe’s or Home Depot the stores are empty of customers and nobody is buying anything. Many stores, like West Marine, have little or no stock. I still keeping seeing friends and family losing their jobs. The P/E ratio of the S&P 500 is 130. Some people are buying furniture, but stuff that is much cheaper. Credit card delinquency is getting worse. The worst of Alt-A mortgages is yet to hit. Right now, I see a disconnect between Wall Street and the real economy. Some say Wall Street is forwarding looking but Wall Street completely missed the current recession. God help us when interest rates go up.
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While there is a linear correlation, is there a direct provable cause – effect relationship between the Fed’s $917 billion investment and the S&P? What does the graph look like over a longer period of time, say 2yr, 5 yr, 10yr?  Â
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