S&P 500 has grown by 2.5% since the beginning of September, 2012. The market owns this growth to 2 days: the 6th of September, when the president of the European Central Bank announced the repurchase of problem assets (S&P 500 grew by 2.02% in a day) and the 13th of September, when Ben Bernanke, the Head of the FRS announced the MBS repurchase for $40B per month (S&P grew by 1.63% in a day). The rest of the month investors were quiet and trying to comprehend what to do next: sell based on fulfilled expectations or buy commodities, high yield bonds, and risky stocks. Read more »
Posts tagged: FRS
Investors are getting nervous as there are no signs on behalf of either the FRS or the ECB regarding further infusions of money, such as QE, LTRO or a cure like Twist. The market picture is like a party running low on alcohol when there used to be plenty. If this is the case, the hangover won’t last long. The paradox of today’s financial markets is that the participants seek artificial illusory ideas (which, nevertheless, work!) weakly related to the real economy. At the same time, real disposable income per capita in the U.S. is decreasing gradually while it is the basis of final demand, constituting over 70% of the country’s economy.
Here is the Fed policy on the S&P500