The Fed's Stock Market

I saw this great opinion piece in today's WSJ by Ruchir Sharma: Trump Tees Up a Necessary Debate on the Fed. 

He ties 60% of post 2008 stock market gains to the Fed's announcements.

. . . the S&P 500 index has gained 699 points since January 2008, and 422 of those points came on the 70 Fed announcement days. The average gain on announcement days was 0.49%, or roughly 50 times higher than the average gain of 0.01% on other days.

This is a sign of dysfunction. The stock market should be a barometer of the economy, but in practice it has become a barometer of Fed policy.

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Stock prices have held steady even though corporate earnings have been falling since 2014. Valuations—the ratio of price to earnings—continue to rise. With investors searching for yield in the low interest-rate world created by the Fed, the valuations of stocks that pay high dividends are particularly stretched. The markets are as dependent on the Fed as ever.

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Since the rich own more assets, they gain the most. In this way the Fed’s policies have fueled a sharp rise in wealth inequality world-wide—and a boom in the global population of billionaires.

Never mind how that company's operations are doing when you buy their stock. 

Just make sure Janet Yellen is running the show at the Federal Reserve Bank.