One would think that with the amount of stimulus the Federal Reserve has been printing, that commodities and perhaps precious metals would be the benefactor of such stimulus along with stocks. From the chart below, it looks like only stocks have received the share of appreciation rising roughly 9% year to date.
Stocks (SPY) has outperformed copper (JJC), soft commodities (JJG), oil ($WTIC), gold (GLD) and bonds (TLT) by a wide margin. With these type of returns there would be little reason to stop the asset purchase programs currently running as long as inflation is kept in check. Of course bonds selling off creating rising bond yields is not the ideal response that the Fed wants to occur either. Bond yields are too low at present to worry about that scenario playing out.
Bottom Line: The stimulus of 85 billion a month in a combination of mortgage backed securities and treasury purchases have had a positive effect on stocks, and a muted effect on other asset classes such as commodities, precious metals and bonds, putting the stimulus programs in the sweet spot for now. I think any market pullbacks will be in the range of -3% to a -4% sell off in the intermediate term. Thank you for reading.
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