Wednesday, August 24, 2016

US Equities Market: A FED run business

Since the financial crisis back in 2008 many believe that the US equities market is essentially a FED run business.We think that this notion is true.Below you can see the close correlation between the broad US equities market and FED monetary base.

Also we would like to note that every time monetary base formed a plateau the market went sideways.However interestingly market tends to start a prolonged upmove about 6 months BEFORE a significant monetary expansion.
Current monetary plateau lasted about 2 years (on October).Market started to rally since last February which is exactly 6 months ahead of Oct 2016....
We believe that market discounts an expansion of monetary base from October 2016 onwards and therefore a significant rise for stocks...
Happy trading!