On Thursday the stock market partied like it was April 15 – not US tax day, but April 15, 1912, when the Titanic sank.
With a worse-than-expected report on producer prices on top of the previous day’s blowout Consumer Price Index number, one might have expected inflation fears to drive stock prices down again. Not so: the S&P 500 recovered most of Wednesday’s big loss, rising 1.6 percent.
If investors have learned one thing in the past ten years, it is: Don’t fight the Federal Reserve. As the Chart of the Day shows, the valuation of the S&P 500 (its forward price-earnings ratio based on forecasts by the analysts’ consensus) has followed the Federal Reserve’s portfolio expansion.