This post on Zero Hedge should serve as a reminder that people who use one “less bad” statistic to support the case for economic recovery are metaphorically bringing a knife to a gun fight. Economic performance, market performance, and fiscal and monetary policy are incredibly complex subjects that are both interconnected and operate on their own trajectories, but as is usually the case every snapshot in time usually reacts disproportionately to one of the above factors and right now what the Fed is doing certainly seems to be the critical set of actions.
And the scariest part of the chart is the tail end: even with the unleashed dam of liquidity, the market still has a massive retracement ahead of it before it can recover the adjusted losses it has suffered since the last credit bubble. Ironically a 50% run up in the S&P has not been enough to offset on an apples-to-apples basis the unprecedented liquidity efforts let lose by Chairman Ben.
The bottom line is that when viewed from the perspective of liquidity fueling the market, the S&P 500 has never been in a worse situation. And alas, as the Fed’s balance sheet climbs to $4 trillion +, absent a multi-year parabolic rise in stocks, liquidity will increasingly lose its power to sustain markets to historical overbloated levels. But Ben Bernanke will go down in flames, and take down America with him, trying to disprove this hypothesis.