Deciding to take a look at the numbers myself, I went to the Treasury website and pulled down data from the weekly “Factors Affecting Reserve Balances,” specifically, the weekly average dollar value of securities held outright by the Fed. This includes Treasury, agency, and mortgage-backed securities. The data from the Fed can be found here
The chart below graphs 566 weekly observations of this data compared to the S&P 500
(INDEXSP:.INX) from December 2003 through last week. A simple correlation of stock prices vs. QE from the start of the data to the S&P 500 low in early March 2009 is a quite low 0.57. Since that time – I chose the week ending March 6, 2009 -- the correlation has been a rather significant 0.93.
I think I know all I need to know. A taper will topple equities.
No positions in stocks mentioned.
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