Equities Will Require QE in the Future

FOMC Day is Here

So take a look at this chart we compiled, it shows the performance of being long 5 SP500 contracts vs -2 Nasdaq contracts. We have also outlined the increasing FRB balance sheet assets, which over time, seem to be the requirement post some mean reversion event, in order to propel equities back above their prior highs:

What we are eluding to is the potential FRB balance sheet going to $16T next time around, this would be another doubling of the balance sheet from current levels. Whether or not the investing public will back such an inflationary expansion is another remains to be seen. the bigger question will be can the FRB add assets to its balance sheet while maintaining a higher than ZIRP Federal Funds rate? Maybe they can, maybe they can’t, but we are certain this scenario will arise again in the future because without QE it doesn’t seem like asset prices can continue their lofty ascent.

Ok onto our trackers as the market has been calm here pre FOMC and tomorrows a virtual non event if they stick with the market sentiment of no rate hike, but the pressor as always will be key. We doubt Powell will change any wording and “data dependent” will be the theme…we just wish one of the journalists would ask why the FRB is still paying IORB, if only just once, that would be an amazing question.

Ok as far as today’s settlements 2Y hit another high today closing at 5.111%:

The MEGA8s have been muted as well preFOMC, Apple surprisingly stronger:

As far as the GFBP, no changes into FOMC:

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