Out of Step

Now
The mist across the window hides the lines
But nothing hides the color of the lights that shine
Electricity so fine
Look and dry your eyes
--Joe Jackson

Another review demonstrating the responsiveness of risk assets to Fed stimulus programs. Stocks have moved higher during each of the Fed's three marquee programs (QE1, QE2, Twist) over the past 3 yrs. When the programs ended, so did higher stock prices.

What caught my eye here was the divergence between commodities and stocks. During both QE1 and QE2, stocks and commodities responded higher in kind. During Twist, however, stocks moved higher while commodities did not.

The author posits that commodities didn't respond because Twist was not as much direct money printing as it was a yield curve modification program. Fair enough, but that does not does explain why stocks did move higher with Twist. One macro difference is that the EU implemented LTRO while the Fed was Twisting, but not sure how that would explain the divergence.

During this last round of stimulus, US stocks have generally been trading out of step with other asset categories--both domestic and global.

position in SPX