Central banks down to their boxers

Lots of hype and hope on the prospects of QE-Ad infinitum perpetually ramping stocks. Yes, and one can never rule out the possibility of a tooth fairy either. For those that prefer evidence-based beliefs, I offer this one distinction between the latest QE promise over the previous three. As captured in the charts below showing current stock valuations and then prices in blue and then yellow versus the ISM in grey and green(economic strength), this time stocks had already rocketed up off a prior low in anticipation of the Fed’s perpetual elixir. This time stocks were already near market cycle highs when the announcement finally came. And this time, the global economy was not in the depths of a recognized recession but widely believed to be muddling through. Unlike the experience entering the last two recessions when overnight rates were over 5% and central banks had not already prolapsed their own balance sheets, this time central bankers have already bet their vestments during the “boom” time and now enter the next round of “bust” wearing only boxers.