QE has soothed the animal spirits and the beasts on the Street have come to believe that they need it to survive. (At least the bulls feel this way.) It is both sedative and stimulant, and it is highly addictive. Dr. Feelgood aka Ben Bernanke has kept the supply ready but people are worried that the free money days might be coming to a close. Every time the Street thinks their laudanum is about to be taken away it throws a fit. We are in an addict’s trap.
(From Real Clear Markets)
This is consistent with what I believe is really at the core of the current financial landscape. To an extent that is far greater than it has been in the past, the markets are dependent on confidence rather than fundamentals. Real world indicators of economic ill health are now second page news. The headlines belong to QE, which has become the central, if not singular, element in that maintenance of investor confidence. The belief that the Federal Reserve will do all that it can to keep markets afloat for as long as possible has become a necessary condition for financial success. The “Greenspan Put” has become enshrined.