During the past year, since more than 150MM Americans voted in the 2020 election, the US has had to contend with the lingering fallout from an unprecedented pandemic, has struggled with surging gas prices and inflation the likes of which haven't been seen in decades, all while crime and drug overdose deaths have spiked, and thousands of small businesses (and even many corporations) are struggling to find enough workers to keep operating.
But despite all this, the US stock market - or, to be more specific, the S&P 500 - has surged 37% since Nov. 3, 2020, capping off its best year following a US presidential election in history.
However, those trying to justify this outcome are having great difficulty pinning it on fundamentals; rather, it seems even professional money managers are finally admitting that the market's performance has more to do with the "everything rally" than any specific policy decision. According to Bloomberg, Charles Schwab UK Managing Director Richard Flynn said the "everything rally" began following the vaccine rollout. But anybody who has been paying attention to markets for the last decade - especially since the start of the pandemic - knows that vaccines more than likely have nothing to do with the US equity market's performance.
The real driver of the rally is - as it has been since the Fed launched its grand monetary experiment in the wake of the financial crisis - the Fed, and the torrent of liquidity provided by the expansion of its balance sheet.
Surprisingly, this is an extremely controversial position, with a seemingly endless army of analysts, strategists and FinTwit big shots willing to defend valuations based on fundamentals. Those voices have grown particularly loud since Q3 earnings season started.
But President Biden has not delivered on his economic promises; in fact, the state of the economy has only deteriorated since the 2020 election.
Needless to say, no other president has seen such money pumping during their first term. What President Obama saw was a small fraction of the Fed's post-pandemic printing (and remember, President Trump had to literally bully Fed Chairman Jerome Powell to keep the taps running during his first term).
So, as the market braces for today's FOMC press conference, and President Biden continues to dodge questions about whether he will in fact reappoint Powell to lead the Fed (since the Fed trading scandal has given Biden the perfect excuse to dump Powell, just like Sen Elizabeth Warren wants) for a second term, just try to imagine if you can what the market would look like without the Fed's money printing backing up trillions of dollars in Congressional spending (otherwise known as MMT).
This could be Powell's 2nd to last FOMC presser— zerohedge (@zerohedge) November 3, 2021
The only question now: will Powell go quietly?
Wouldn't it be awesome if he knows he's getting dumped and said "Fuck it-- I can finally stop pretending to be a liberal," and he stopped all QE this afternoon and jacked-up rates to 5%?— Stanphyl Capital (@StanphylCap) November 3, 2021
THAT would be the BOSS move!