The One Chart The Proves How The Fed Singlehandedly Doubled The Stock Market Since 1997

Back in 2012, we reported that in a stunning research report released by none other than the New York Fed itself, "since 1994, more than 80 percent of the equity premium on U.S. stocks has been earned over the twenty-four hours preceding scheduled Federal Open Market Committee (FOMC) announcements (which occur only eight times a year)—a phenomenon we call the pre-FOMC announcement 'drift.'"

In other words, stripping away philosophical debates over the nature of money, whether QE is monetization of debt, whether the NY Fed trading desk intervenes in markets (via Citadel or alone), there was quantitative proof demonstrating that on days immediately surrounding FOMC announcements, the S&P 500 enjoyed a statistical surge far greater than on all other days.

Today we update this stunning finding courtesy of data from Stifel which lays bare all hollow rhetoric of a "secular bull market", as one which has been driven from the very beginning by the Fed itself. In fact, without the indirect boost of FOMC meetings, the S&P today be at the same level it was 20 years ago!

From Stifel's Barry Bannister

Talk of a “secular bull market” should not dismiss the way in which Fed policy helped “create” higher stock prices since the 1990s. There is a ~1,000 point gap between the actual S&P 500 since mid-1997 (red line) and the S&P 500 excluding price changes that occurred the “day of plus day before” every Fed meeting (147 meetings, so 294 days) since mid-1997. The blue line is flat, like past Secular Bear Markets.

And for the fans of statistics, here is the bottom line math:

By excluding 294 "day of + day before" Fed meeting trading days (147 x 2 days excluded) out of over 4,500 total trading days since Jun-1997, the drop is ~50%. Basically, excluding just 6% of Fed-influenced days cuts the S&P 500 price in half.