No one really knows the impact of QE on the stock market,. Impossible to quantify.
That is incorrect. QE or expansion of the "monetary base" will always increase the price on financial and real assets. it is artificial demand for these assets. since supply/demand curve is eco 101 you should know prices for these assets rise. it trickles down the capital structure and equity prices rise as (expected) return on equity diminishes as well. this explains p/e multiples on fast growing tech companies and multiple expansion in the markets.[/quote]
1. So if I found and example of qe somewhere in the world, and found the stock market falling at the same time...what you think then? What are the chances of my finding that example?
2. I really meant that the degree of impact of QE on the stock market is impossible to quantify. 100 dow points? 1000 dow points? 5000 dow points? animal spirits such as they are make it impossible to know how much QE has boosted the stock market.
3. High PE multiples on fast growing tech companies have existed from the beginning of public markets. Blaming QE for high multiples is not really fair. People will pay very high prices for growth - doesn't matter what bonds the fed reserve may or may not be buying.
My master point is that you might be being too formulaic - the titanic US economy is not a machine made of quantifiable inputs and outputs. QE is but one element.[/quote]
gmt's point makes perfect sense. It is a general, but accurate point. Agip is the one that is trying to be too precise in order to appear "correct". Who cares if QE 1, 2, 3 & Op Twist have accounted for 8000 points or 6750 points on the DJIA? The basic point still stands - it is a big, if not THE big reason the market is up big. There is a reason they have been talking about phasing it out for years, yet is has mostly grown.