The Federal Reserve has provided an ocean of liquidity since the great recession that followed the global financial crisis through the QE1, QE2 and QE3 programs. In fact, the Fed’s balance sheet has grown significantly due to these programs. Total assets have soared from just $869.0 billion in August 2007 to well over $3.0 Trillion as of February 20, 2013.
Click to enlarge
Source: The Federal Reserve
Equity prices have increased strongly in line with rising liquidity. The following chart shows the correlation between Fed’s growing balance sheet and the S&P 500:
Source: The Week Ahead, February 25 – March 1, 2013, CIBC World Markets
SPDR S&P 500 ETF (SPY)
Disclosure: No Positions