In his latest Bedtime With BTIG note that got sent out last night, Dan Greenhaus discusses the age old question: Is this a Fed driven market?His answer: Kind of.
He points do the soothing effects of Bernanke on the hill the last couple days for the quick reversal in panic that we saw earlier this week.
But he also points to something a lot more powerful than Bernanke: Corporate profits.
Check out this stat:
While there is no doubt that Fed support has been a crucial, crucial support mechanism for higher equity values and economic improvement since first being utilized in late 2008, one cannot ignore (nor, admittedly, separate out) the improvement in the earnings environment. Our good friend Larry Kudlow is fond of saying that profits are the mother’s milk of stock prices. In that regard, the S&P 500’s four quarter trailing EPS is currently $98 or so. At the end of March 2009, that number was $43 or so meaning EPS has more than doubled, 129% higher today than at the equity market’s bottom. Guess how much the S&P 500 is up since then? 128%. We suppose this isn’t all about the Federal Reserve after all.
Anytime someone points to a Fed driven rally, this is an easy datapoint to counter with.