Maybe, sort of. Institutional Investors can’t borrow directly from the Fed, banks have to intermediate and they don’t always react the way the Fed expects. My theory is that leveraged investors (certain types of Hedge Funds) are impacted by changes in liquidity driven by Fed balance sheet changes. I wrote it out in this thread above.
I’d be curious to know what you think about the theory Fed asset purchases are driving the market.
The link between Fed balance sheet and stock prices isn’t tight, but there seems to be a fuzzy connection—stock returns were higher than long run average during QE1-3, then went sort of sideways for awhile after 3 ended, after 2016 the global economy was on a better footing and stocks rallied until QT ramped up enough to matter, draining liquidity and the 4Q18 “correction” followed by resumed rallying coincident with “stealth QE” to mitigate illiquidity in the