sp'monthly8 - QE periods
Summary
We effectively went straight up across much of 2013, and there is no question that was largely due to the new money - one trillion of it, created by the Bernanke.
As I have always touted 'where else is the new money going to go?' Sure, a little will end up in places like real estate, but the majority of it has ended up in equities.
After all, the capital markets are ironically suffering from low interest rates, everyone is desperate to find a yield/growth of more than 1%. Only the equity market is offering that opportunity. It really is that simple.
QE in 2014
We start the year with $75bn a month of QE. $35bn MBS, and $40bn of POMO - T-bond buying. There is little doubt the Fed will probably initiate another 10/15bn cut, probably in the March/May period.
Even if you assume though, $60bn a month on average across 2014, that amounts to an annual $720bn..which is still bigger than the 2008 TARP, that everyone still gets overly focused on.
My best guess?
Another taper in the spring, which the market will cope with, but the market will start to price in much lower QE levels..even a perceived cessation by late 2014/early 2015. With a geo-political 'scare' next summer/autumn (China/Japan ?), I expect the market to get whacked from sp'1950/2050, down to the 1625/1575 zone...before Yellen increases QE..to renew the equity market ramp.
more later....