For the first time since early March, The Dow dropped back near 17,000 earlier (down over 1000 points from the pre-Brexit peak) with a modest bounce off the EU close lows. However, this plunge across risk assets has erased all post-QE3 gains with Trannies down 20% since Oct 2014. Having been almost 200 points ‘rich’ to the Fed balance sheet, it appears reality is setting in once again and risk is mean-reverting.
Post-QE3…
Which, once again, reverts S&P to its Fed Balance Sheet implied level…
FV is around 1960 – but as we saw in Aug 2015 and Jan 2016, the market must overshoot before The Fed will jawbone it back to hope.
Charts: Bloomberg
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