The Fed Continues Giving Money to Wall Street Even Without QE

By: Graham_Summers

Stocks will likely rally this week for the simple reason that it is options expiration week.

The Fed almost always gives Wall Street extra money to play around with during options expiration.

• On average the Fed expands its balance sheet by $9.1 billion during options expiration weeks (expansions means money flows into Wall Street banks).

• During non-options expiration weeks, the Fed contracts its balance sheet by an average of $2.5 billion.

Below is a table charting changes in the Fed’s balance sheet. Options expiration weeks are gray.

Mind you, this is during a period in which the Fed is not engaged in Quantitative Easing or any other major monetary program. And yet… it still feels the need to hand off an average of $9 billion or so to Wall Street every time options expiration rolls around.

Note also, that the Fed gave Wall Street money almost every week during December. For some reason Janet Yellen felt the need to expand the Fed’s balance sheet by $18 billion during the last month of a year in which most fund managers had performed terribly.

Despite this obvious gift to Wall Street, stocks finished 2015 DOWN. It was the first down year stock have experienced since 2008. And by the looks of the below chart, it’s only going to get worse in 2016!

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Best Regards

Graham Summers

Phoenix Capital Research

http://www.phoenixcapitalmarketing.com

Graham also writes Private Wealth Advisory, a monthly investment advisory focusing on the most lucrative investment opportunities the financial markets have to offer. Graham understands the big picture from both a macro-economic and capital in/outflow perspective. He translates his understanding into finding trends and undervalued investment opportunities months before the markets catch on: the Private Wealth Advisory portfolio has outperformed the S&P 500 three of the last five years, including a 7% return in 2008 vs. a 37% loss for the S&P 500.

Previously, Graham worked as a Senior Financial Analyst covering global markets for several investment firms in the Mid-Atlantic region. He’s lived and performed research in Europe, Asia, the Middle East, and the United States.

© 2015 Copyright Graham Summers - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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