Given that the market has given up nearly all of its post-QE gains, this is a really interesting comment from Dan Greenhaus at BTIG:
…several clients have expressed a “fear” of sorts that this round of QE will fail to impact asset prices in the way it is perceived to have done in the past.
This echoes something we wrote about last weekend, in suggesting that the market’s moves were much more about fundamentals than QE:
If you think that this market is fundamentals driven, then it means that if the data turns sour (certainly possible) the market could easily tumble in spite of the loose Fed policy. Not only that, it’s easy to imagine a downturn in the data accompanied by a feeling that the Fed had already fired bazooka, leading to the conclusion that there was no ammo left anywhere to address the economy, thus causing market panic. We’re not saying this will happen, but it would not be a total surprise.
Ultimately, it’s probably way premature to start declaring verdicts on QE’s effects on the market or the economy.
Greenhaus points to this chart showing the performance of markets 70 sessions prior to QE2 and QE3, showing that basically the behaviour of the market has been the same.
If markets keep going nowhere (and if we keep seeing commodities lag) the sense that this time the Fed’s magic isn’t working could start to become an issue.
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