How Quantitative Easing Affects Stock Market?

SPCFD:SPX   S&P 500 Index
4958 9
It is obvious that FED stimulus lifted the markets since the beginning of the financial crisis. The impact of the tapering announcements, however, brings bears on the scene, at least in short term. The corrections after previous tapering announcements for S&P500 appeared to be prolonged and severe. Currently the debate over the reducing of QE3 is expected to head market to the south again.
@CapitalHubs, could you please post an update on this? REALLY interesting to backtest these ideas.
CapitalHubs charttrader
Sure! Check here:
+1 Reply
charttrader CapitalHubs
Awesome! Thank you very much!
Can you do an illustration and comparison to the 1929 crash, recovery
CapitalHubs QuantitativeExhaustion
Unfortunately not. The data on TradingView for S&P chart starts back from 1980.
One point I disagree on here is that stimulus lifted the markets - you are assigning too much impact to a policy that has only lowered the yield curve and not actually increased the money supply - to say that it and not broad economic trends are what are lifting the market i think is simplistic. Just because certain events coincided with the markets gains do not make it explanatory. I also want to note that this upcoming tapering is already "known" in the markets as everyone is expecting it... this may make for a quick drop as traders try to take advantage of the announcement but the broad market panic that was seen on the other two announcments i think will not take place. It is just as easy for me to be wrong as you are right though... but if if the debate is "expected to head market to the south again" then that is already built into todays prices... we are buying and selling future expectations
Questioning the effectiveness of the unconventional monetary policy could lead to very long discussion. However one thing is clear and simple - pumping liquidity into the financial system saved the economy. Even considering the complexity of the financial markets still that is visible on the chart. The fact that yesterday the market reacted so fast and so strong on the decision is evidence of the importance of the FED policy. It is also evidence that the correction was somehow priced in. Otherwise the rise would not be so intense. Here you were correct.
Will they.. won't they!!!
tnx for your comparison! interesting times anyway. fundamentals tell one story - stockmarkets the other.
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