This Incredible Chart Shows the Close Relationship Between the S&P 500 and Fed Liquidity
Earnings, schmearnings. Is what really matters just liquidity?This incredible chart, from Apollo Global Management chief economist Torsten Slok, shows the close relationship between S&P 500 performance and net Federal Reserve quantitative easing since the pandemic began.Here, Fed QE is defined as the Fed's total assets minus the balance of the Treasury General Account as well as the temporary cash added or drained through overnight reverse repos."Since SVB collapsed, the Fed has been adding liquidity, and the S&P 500 is up more than 10%. The high correlation between Fed net QE and the S&P 500 seen in the chart below suggests that Fed liquidity is a crucial driver of the stock market," said Slok.The Fed would dispute that the emergency lending programs put in place are a form of quantitative easing, but nonetheless, its balance sheet has expanded.Slok also warned, however, that what the Fed gives, the Fed can take away.U.S. markets are closed Monday in observance of the Juneteenth hol
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