As corporate profits have decelerated over the last year the S&P 500 was left with little more than the monetary base, which had been ramped like crazy by post-2008 monetary policy. Then money supply began to sag and the bulls were in trouble, until… money supply got a new boost lately.
Where did that come from? Hey, I have enough macro indicators and charts to work here. You POMO/SOMA detectives will have to go and find the answers to the ‘why?’. All I know is the ‘is’ and of late the monetary base is rising. It also looks to be in a topping structure just like the market. But with Fed panic (and associated loss of credibility) now in the picture, we need to be prepared for asymmetrical outcomes.
Here is the chart, courtesy of SlopeCharts, showing the market and the ‘base’ moving together. This must be child’s play for the quants, who I am sure had this calculated from the get go. Right? Like Marty Armstrong, don’t they forecast the world? Seriously, I am curious.
[edit] As if its ears were burning (with the comment above about corporate profit deceleration) into my inbox comes FactSet with some data…
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