When QE ends today, the Fed balance sheet will stop expanding. Which means stocks will be standing on their own two legs for the first time in the last two years. Unfortunately, those two legs: economic growth and earnings are both weak.
Having just engaged in QE for TWO SOLID YEARS STRAIGHT the Fed would totally destroy any and all credibility in its monetary policies to engage in QE anytime within the next three to six months.
All the talk of “helping small business” and “creating jobs” is just that: talk. Those who actually show initiative to create business shouldn’t be overburdened with tax loads and bureaucratic red tap.
Janet Yellen is a career academic. This is not necessarily a bad thing. However, unlike most career academics, Janet Yellen is in charge of the US economy. In this light, one has to ask aloud, “why would you put someone with absolutely zero experience in creating jobs, growing a business, lending money, hiring, firing, etc. in
Put another way, those individuals responsible for running the largest companies in the US, who know more about their companies’ growth prospects and the economy have used the Fed’s policies to cash out.
So… we’ve got a weak and fragile market, losing two of its biggest drivers… at the same time that the Fed is ending QE. This is a recipe for a potential bloodbath. If we wipe out the “bubble” portion of the market move from 2009, we’re going to 1,250 on the S&P 500.
During every major breakdown in the last five years, the Fed announced a new monetary program. This time around, the Fed is committed to ending QE... So who will save stocks now?
At the end of the day, the Fed with its misguided theories have demolished capitalism: the single most powerful form of wealth generation in the history of mankind. All the Fed has really accomplished is leverage the entire financial by an even greater amount… which has set the stage for a collapse that will make 2008 look like a picnic.
