The S&P 500’s lengthy bull run began in 2009 as the Federal Reserve fired up quantitative easing. Suppressing bond yields and financial market volatility via QE has certainly been a boon for equities.
The big central banks have bought some $14tn of assets Plus close to Zero Interest rate, providing a very supportive tide of liquidity for global equities led by the S&P 500.
Now as the Fed looks to start reducing its $4.5tn balance sheet this year and the European Central Bank discusses tapering bond purchases in 2018, equities will soon need to reflect a reduction in the so-called punchbowl.
The swing in global liquidity will weigh on the performance of stocks, with the Fed, ECB, BOE about to reduce its balance sheets. For now, there appears further room for equities to run higher but not far.
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