January 28, 2014
Are the Federal Reserve’s fingerprints on Wall Street’s latest 911 call?
If there’s been a traceable pattern to the U.S. stock market’s biggest dips in recent years, including the latest swoon driven by turbulence in emerging markets, it is this: Sell-offs have coincided with periods when the Federal Reserve was ending or pulling back on its market-friendly stimulus programs.
Ever since the Fed began its unprecedented bond-buying program in late 2008, stocks have tended to go up when the central bank has been in the market supporting asset prices. In contrast, stocks have declined whenever the Fed has been out of the market or cutting back on its asset purchases.