Last summer, the Bernanke put had a strike range in the 1020-1050 SPX range. From what’s been seen in actual economic growth when it officially started in Nov was that it was of no help. It certainly though helped asset prices as stocks rose 30% and credit spreads tightened dramatically. We’ve now seen the wreckage that followed after it ended on June 30th, the entire QE2 equity rally has almost reversed. Here lies the fallacy with any short term stimulus, either monetary or fiscal. At some point it has to end and then we revert back to where we were with then a bill to pay either thru higher taxes or from the eventual exit of policy. The only thing that changes economic behavior in a substantive way is policy that has a long term view, not something that will end in 6-12 months. Rest assured though, the Fed doesn’t realize this (US Govt doesn’t either) and Bernanke will prep the market again.
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