Why (For The Fed) It Is All In The Foreplay
Much has been written on the fading efficacy of the Fed/ECB grand-monetization schemes over the past few years. The following chart clarifies the market's apparent 'getting-religion' moment and that since QE1 - and the wake-up call that indeed the Central Banks of the world will inflate their way out of this mess - the market has increasingly front-run (and therefore removed) much of the actual balance sheet expansion efforts of the monetary overlords. One thing is sure, the latest ramp in stocks is absolutely front-running 'something' big from the Fed/ECB and for now, they are late!
Fed and ECB balance sheet - upper pane - clearly its not the stock
3-month rate of change - middle pane - but the flow correlates (with a market lead) as we have long suggested...
as the market - lower pane - has switched from 'not getting it' to now front-running everything...
Does the Fed need to re-instill some discipline in order to regain its omnipotence?
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