Many market pundits are speculating Fed Chairman Bernanke will use his Jackson Hole, Wyoming, to set the stage for another round of Quantitative Easing, aka QE3.
Phil Gose, of Capital Resource Management in Iowa, sent me an interesting chart of the S&P 500 with annotations on key events, including Fed intervention, over the past five years.
|For each previous QE type of program our Fed has enacted, the chart below illustrates the market reaction to easy money policy. QE1 and QE2 both saw market climbs followed by exhaustive selloffs once the programs wound down. After each selloff, the fed rolls out a new QE program and the pattern repeats. I don’t know any better than anyone else about the appropriateness of these actions, but the markets seem to love them. Will it love another QE? I guess we will find out soon enough.
Phil’s chart is similar to one that I frequently update, featuring the S&P 500, the 10-year yield, and the Fed Funds Rate over a similar timeframe (see here). Phil’s version has the additional enhancement of some revealing trend lines.
As I type this, the 2012 Jackson Hole event is just three days away, and the anticipation is far greater than Wednesday’s Q2 GDP second estimate or Thursday’s Personal Income and Outlays update (a personal favorite).
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Images: via Flickr (licence attribution)
About The Author
My original dshort.com website was launched in February 2005 using a domain name based on my real name, Doug Short. I’m a formerly retired first wave boomer with a Ph.D. in English from Duke. Now my website has been acquired byAdvisor Perspectives, where I have been appointed the Vice President of Research.
My first career was a faculty position at North Carolina State University, where I achieved the rank of Full Professor in 1983. During the early ’80s I got hooked on academic uses of microcomputers for research and instruction. In 1983, I co-directed the Sixth International Conference on Computers and the Humanities. An IBM executive who attended the conference made me a job offer I couldn’t refuse.
Thus began my new career as a Higher Education Consultant for IBM — an ambassador for Information Technology to major universities around the country. After 12 years with Big Blue, I grew tired of the constant travel and left for a series of IT management positions in the Research Triangle area of North Carolina. I concluded my IT career managing the group responsible for email and research databases at GlaxoSmithKline until my retirement in 2006.
Contrary to what many visitors assume based on my last name, I’m not a bearish short seller. It’s true that some of my content has been a bit pessimistic in recent years. But I believe this is a result of economic realities and not a personal bias. For the record, my efforts to educate others about bear markets date from November 2007, as this Motley Fool article attests.