Global Pendulum
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Issue 1 · Late October 2026

Fed assets → US stocks

Common explanation (Cause · same direction): Large Fed bond purchases push down long-term rates, investors move the money from the bonds they sell into stocks and other assets, and stock prices get support.

This issue: Fed assets at 42 (neutral), US stocks at 94 (hot) — at least one is in the neutral range (40⁠–⁠60), so we make no call this issue.

Hot and cold describe position, not good or bad: warm does not mean a fall is coming, and an extreme reading does not mean a quick reversal. We describe history only, with no buy or sell advice.

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Where it stands now

Where the two indicators stand this issue

Fed assets: Now 2.4% (YoY). US stocks: 84.4% above its 10-year average.

Tests

Does this link hold up?

  1. Common explanationLarge Fed bond purchases push down long-term rates, investors move the money from the bonds they sell into stocks and other assets, and stock prices get supportSource: Federal Reserve Board, “Monetary Policy since the Onset of the Crisis” (2012). The speech is cautious about the effect on stock prices.
  2. Tested against our dataAgreement between the positions of Fed assets and US stocks (3-month lag), measured in the direction of the common explanation: +0.06. Looking at every 5-year period (shifted one year at a time), the two moved in that direction in 6 of 8; data start only in 2013. In most periods the two moved the way the common explanation says, but their highs and lows do not line up over the whole history, so overall no relationship is visible.Not visible in our data
  3. Periods when it did not holdAcross 8 5-year periods, out of step in 2013⁠–⁠2019.

History

The two lines, overlaid

Data: Federal Reserve H.4.1 (WALCL), via FRED (Federal Reserve Bank of St. Louis); Professor Robert J. Shiller, public data. Positions: our calculation.

Fed assetsUS stocks

Limits

What this card cannot tell you

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