Putting aside the November Presidential election which I think will single handedly determine the direction of the stock market in the last two months of the year, we all seem to be waiting for what central bankers in Europe and the US will do. In the US, every single economic data point triggers a QE or not to QE debate and we’re all watching Spain to see when they’ll ask for help. In terms of what most excites market participants, that being central bank action, the market seems to love sadomasochism. This is where central bankers turn economic and market pain into pleasure. With the S&P’s approaching the intraday high of the year of 1422 reached on April 2nd, not supported by the deteriorating corporate earnings picture where Q3 eps growth may be negative y/o/y, how much pleasure has been priced in assuming the Fed still likes giving the S&M (next appointment September 13th) as much as the market likes to receive it?
