Current chatter among market analysts largely centers economic conditions in Europe and slower, but still robust Chinese growth, as the triggers behind the recent weakness in the S&P 500.
As a counter to the Europe and China stories as the main causes of the weakness we’ve seen since September 18th, take a look at the following graphic.
The figure shows the performance of the S&P 500 overlaid with the expansion in the Federal Reserve balance sheet.
No doubt, there’s a fairly strong connection.
When QE1 ended in June 2010, the S&P 500 declined around 15% from peak to trough (April to mid-August). (The market was ahead of the curve in anticipating the...
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