Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks, Bitcoin, Gold and Silver Markets Brief - 18th Feb 25
Harnessing Market Insights to Drive Financial Success - 18th Feb 25
Stock Market Bubble 2025 - 11th Feb 25
Fed Interest Rate Cut Probability - 11th Feb 25
Global Liquidity Prepares to Fire Bull Market Booster Rockets - 11th Feb 25
Stock Market Sentiment Speaks: A Long-Term Bear Market Is Simply Impossible Today - 11th Feb 25
A Stock Market Chart That’s Out of This World - 11th Feb 25
These Are The Banks The Fed Believes Will Fail - 11th Feb 25
S&P 500: Dangerous Fragility Near Record High - 11th Feb 25
Stocks, Bitcoin and Crypto Markets Get High on Donald Trump Pump - 10th Feb 25
Bitcoin Break Out, MSTR Rocket to the Moon! AI Tech Stocks Earnings Season - 10th Feb 25
Liquidity and Inflation - 10th Feb 25
Gold Stocks Valuation Anomaly - 10th Feb 25
Stocks, Bitcoin and Crypto's Under President Donald Pump - 8th Feb 25
Transition to a New Global Monetary System - 8th Feb 25
Betting On Outliers: Yuri Milner and the Art of the Power Law - 8th Feb 25
President Black Swan Slithers into the Year of the Snake, Chaos Rules! - 2nd Feb 25
Trump's Squid Game America, a Year of Black Swans and Bull Market Pumps - 24th Jan 25
Japan Interest Rate Hike - Black Swan Panic Event Incoming? - 23rd Jan 25
It's Five Nights at Freddy's Again! - 12th Jan 25
Squid Game Stock Market 2025 - 5th Jan 25

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market In Ben We Trust

Stock-Markets / Stock Markets 2010 Oct 01, 2010 - 05:09 PM GMT

By: Kevin_George

Stock-Markets

Global indices have been powering higher, led by strong U.S. equities and a falling dollar, which has seen the largest September rise on Wall Street since 1939. This has been bullish for all ‘risk’ correlated trades with commodities and foreign currencies being strongly bid.


One of the main drivers of this rally is the expectation of ‘QE2’ from the Federal Reserve, as it continues large interventions in the capital markets. The chart below from Oliver Jakob at Petromatrix, shows the correlation of the Fed’s POMO operations and it’s correlation to equity prices.

The first large bout of buying helped to put a floor under equities at the March ’09 lows and the current interventions have helped to drive equities to their recent highs, as market volume continues to fall.

The Bernanke effect has put a floor under equities, despite a backdrop of debt concerns in Europe, with Ireland experiencing further problems and some weak data from both the U.S. and Eurozone. The irony now is that weak data is actually a driver for stocks, with it being seen as further confirmation that quantitative easing will return.

The surge in stocks is doing no harm to the Fed’s attempts to offload its various stock holdings. A sale of a 5% holding in Citgroup has brought a $1bn profit for taxpayers, with an exit strategy on AIG, timed for a month ahead of the November mid-terms. Some may see the timing of this stock rally as being more than just coincidence.

Investors are now playing a dangerous game if they fail to read between the lines and get caught in the hysteria of the recent rally. The sovereign debt issues are not going away and if they are also naïve to the fallibility of leaders, whose policies helped to create the crisis, they may be in for a nasty shock. The current rally in the Euro/U.S dollar rate, for example, is only going to make things harder for Eurozone members who are trying to implement austerity and produce positive growth. The higher these ‘risk’ assets go, the further they would have to fall in a return to negative sentiment.

By Kevin George

kg-publishing@hotmail.co.uk

I am an independent financial analyst and trader.
© 2009 Copyright Kevin George - 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.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in