Why Stocks Surge Despite Fed Shrinkage

Market Performance - The S&P 500 has increased by 82% over the past three years, despite the Federal Reserve reducing its balance sheet by 27% [1][3] - The current market rally challenges traditional liquidity theories, indicating that factors beyond central bank policies are influencing investor confidence [2][4] Economic Indicators - Corporate bankruptcies are approaching 15-year highs, and consumer delinquencies on credit cards, auto loans, and student debt are rising [7] - The commercial real estate sector is facing challenges due to declining property values and stricter refinancing terms, which are not reflected in major equity indices [8] Sector Performance - Gains in the stock market are concentrated among a few mega-cap technology companies, masking weaknesses in other sectors tied to core economic fundamentals [6] - The performance of equity markets primarily reflects the strength of large firms, while smaller companies and those reliant on credit or discretionary spending are facing headwinds [9] Federal Reserve Dynamics - There is growing skepticism regarding the Federal Reserve's direction and effectiveness, with some investors urging less reliance on Fed commentary for market signals [10]