Stocks Rally With Fed Purchases as QE Buoys S&P 500

Keith Hembre dumped bonds and bought stocks when the Federal Reserve announced its plan Nov. 3 to buy $600 billion of Treasuries. The rationale: to benefit from anticipated market gains on days of Fed purchases.

The chief economist and investment strategist at FAF Advisors Inc. may be on to something. Most of the 47 percent stock rally during the past two years came on days when the Fed pumped money into markets through bond buying, according to data compiled by Bloomberg. Since the $1.7 trillion first round of quantitative easing began on Dec. 5, 2008, the Standard & Poor’s 500 Index of stocks has climbed a combined 267 points on the 212 days when the Fed was adding stimulus, compared with 128 points on the 297 days when it wasn’t.