Following Bernanke's Lead

11/20/12 02:34PM EST

Since the Federal Reserve first initiated quantitative easing back in November of 2008, the US stock market has shot upward in tandem with each subsequent announcement. However, the law of diminishing returns seems to kick in with each new round of easing as the gains following an announcement quickly become short-lived. Keep in mind that the S&P 500 is down -6% since the September 14 high (aka the Bernanke Top).

Following the Keynesian route of printing money over and over again is clearly unsustainable. Moreover, GDP growth is no longer keeping pace with the equity market as growth and earnings continue to slow. A fix is needed and one thing remains certain: another round of easing is not the solution. Some traders may be set on thanking the Fed for quick pops in the market, but over time, all good things come to an end.

Following Bernanke's Lead - fedgdp

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