The S&P 500 has been on a tear since the Fed first started floating the idea of quantitative easing 2.0. Since August 31, the S&P is up more than 11%. The gains are of course nice to see, but the rally is a phony. Stock prices are not rising on improving fundamentals or cheap valuations. Stocks are rising simply because investors are anticipating that the Fed will print more money. For proof that the rally is a phony take a look at the performance of the S&P 500 in terms of a hard currency such as the Swiss Franc. My chart shows that in Swiss franc terms, the S&P 500 still hasn’t breached its early August high. The Fed is debasing the value of the USD and creating illusory stock market gains.
Jeremy Jones, CFA
Latest posts by Jeremy Jones, CFA (see all)
- Is Never Ending Stimulus the New Normal? - June 18, 2019
- Surprise! Even Kids Don’t Like YouTube Kids - June 17, 2019
- As Businesses Tie Themselves to Facebook, They Wonder is it an Anchor or Balloon? - June 14, 2019