Federal Reserve to scale back stimulus by $10 billion

[Morganfleeman]

8. GENERALLY earnings is the catalyst

But in reality, plot the size of the Fed balance sheet against the S&P 500 in the last few years and you'd be a hard pressed to find a better correlation. Earnings growth does not provide the same nearly perfect correlation. The question is whether this manufactured stock boom will lead to better earnings. Earnings are improving but are they improving to a sufficient degree to justify the PE multiple expansion we've seen over the last couple of years? Personally don't think so but the market is not necessarily rational, especially when the primary driver of the market is hot money flows from the bond market where yields are minuscule.