Market rally in lockstep with Fed balance sheet expansion

Message from moi:

Said expansion is due to end in October.

  Afterwards, there will be tighter money as interest rates are set to increase. This rate increase also increases the risk of a sell-off.

Published on Zero Hedge (http://www.zerohedge.com)

Home > Deutsche Bank "Raises The Warning Flag": What The Most Important Chart For The Market Reveals

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Deutsche Bank "Raises The Warning Flag": What The Most Important Chart For The Market Reveals

By Tyler Durden

Created 08/04/2014 - 14:09

"The risk sell-off we've seen in recent weeks frustrates us a little as the chart we've published most this year has pretty much predicted that tougher times would come around July. We've been paying it a lot of attention for over a year now but decided to wait until the autumn before we raised the warning flags. The chart in question (included in today's pdf) is the one showing the Fed balance sheet and the S&P 500 (as a proxy for risk generally). As you can see, since the Fed balance sheet was used as an aggressive policy tool post-GFC, the graph suggests that the S&P 500 is well correlated with the size of the Fed balance sheet...  This is important as virtually all of the mega rally in the last 5 years has come in the Fed balance sheet expansion periods." - Deutsche Bank

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Source URL: http://www.zerohedge.com/news/2014-08-04/deutsche-bank-raises-warning-flag-what-most-important-chart-market-reveals