The ECB helped on Friday, Merkel helped this morning, and then Big Ben came to the rescue and gave the markets more than enough QE and accommodation talk to drive stocks relentlessly higher. I’m not sure that the S&P has moved down 2 points from any level all day. Basically everything but infinite central bank liquidity is off the table (at least for today). Chinese hard landing concerns are a distant memory. Weak economic data today is actually good, because we will get the New QE even sooner.
The argument is that although there is little evidence that the money does anything for the economy, it clearly does a lot for stocks – so we are at multi-year highs. Seems hard to believe that economic data doesn’t matter, especially at multi-year highs, but so far the market is buying into it. The only things that don’t seem to be exuberant today is natural gas and IG18. The CDS index is better today, but still sitting at 90.25, which is almost 5 wider than where we got last week on the tights. Treasuries seem a bit confused whether they are supposed to rally on more QE, or sell-off on a rotation out of fixed income into stocks.
A truly weird day. Nothing much seems to have changed, yet here we are, far more comfortable that the central banks will prop up the market. Volumes remain incredibly low. I don’t get a sense that retail is going to add to their equity allocation based on more easing, this is a very “professional” move. I can’t bring myself to get excited about the market here, but was obviously wrong this morning, when I thought the data might actually mean something.