What Happens When the Stock Market Loses Life Support?

By: Graham_Summers

Stocks are on borrowed time.

The single item that has driven stock prices over the last four plus years (since the 2008 Crash) has been the Fed’s expansion of its balance sheet. David Rosenberg of Gluskin Sheff, depicted this fact beautifully in the chart below:

In plain terms, this chart shows us the Fed is driving stock prices. Virtually every dollar increase in the Fed’s balance sheet has resulted in stock market gains. Take away Fed stimulus and the market would be right back where it was in 2009: with the S&P 500 in the 600-700 range.

Thus, you can safely and factually say that the stock market is on life support from the Fed. Which is why any indication that the Fed will taper its QE program could result in a stock market crash.

The Fed tried hinting at tapering a month or so ago via a placed article at the Wall Street Journal. Everyone got into a panic and Bernanke and his pals quickly went into damage control mode assuring investors that QE could last forever.

Now the talk of QE tapering is spreading. Yesterday Steve Liesman on CNBC (another media personality with close ties to the Fed) stated that the Fed was having internal discussions about the effectiveness of QE.

Later that day, Goldman Sachs Chief Economist, Jan Hatzius, who has very close ties to NY Fed Present Bill Dudley, stated that the Fed may taper QE as early as September.

It is now clear that the Fed is trying to prepare the markets for a withdrawal or tapering of QE. Judging from yesterday’s sell off (yesterday was the FIRST down Tuesday this year), the market is beginning to realize that the party won’t be lasting much longer.

Given that ALL of the stock market gains since 2008 were based on Fed money printing… what do you think will happen when the Fed tries to taper QE?

Investors, take note… the financial system is sending us major warnings…

If you are not already preparing for a potential market collapse, now is the time to be doing so.

I’ve been warning subscribers of my Private Wealth Advisory that we were heading for a dark period in the markets. I’ve outlined precisely how this will play out as well as which investments will profit from another bout of Deflation.

To join us…

Clicking Here Now!!!

Graham Summers

Chief Market Strategist

Good Investing!

http://gainspainscapital.com

PS. If you’re getting worried about the future of the stock market and have yet to take steps to prepare for the Second Round of the Financial Crisis… I highly suggest you download my FREE Special Report specifying exactly how to prepare for what’s to come.

I call it The Financial Crisis “Round Two” Survival Kit. And its 17 pages contain a wealth of information about portfolio protection, which investments to own and how to take out Catastrophe Insurance on the stock market (this “insurance” paid out triple digit gains in the Autumn of 2008).

Again, this is all 100% FREE. To pick up your copy today, got to http://www.gainspainscapital.com and click on FREE REPORTS.

Graham also writes Private Wealth Advisory, a monthly investment advisory focusing on the most lucrative investment opportunities the financial markets have to offer. Graham understands the big picture from both a macro-economic and capital in/outflow perspective. He translates his understanding into finding trends and undervalued investment opportunities months before the markets catch on: the Private Wealth Advisory portfolio has outperformed the S&P 500 three of the last five years, including a 7% return in 2008 vs. a 37% loss for the S&P 500.

Previously, Graham worked as a Senior Financial Analyst covering global markets for several investment firms in the Mid-Atlantic region. He’s lived and performed research in Europe, Asia, the Middle East, and the United States.

© 2013 Copyright Graham Summers - 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.