The Chipotle Theory of Asset Prices

Over the past year, the S&P is down just 4%. In the world of equity markets, that is essentially...nowhere...a nothing burger. This on the heels of the Fed's most aggressive hiking campaign in living memory, one that began last March. Doubtless there have been puzzling rallies and plunges in between, a banking crisis, the makings of a bond market catastrophe and the looming debt ceiling debacle. But in the bigger picture, how do we account for the relative strength of the equity market in the face of this uncertainty?

And here we return to our favorite topic of the year, the Fed Balance Sheet. Which, you may have guessed it, has shrunk just 4% in a year. Sift through all the divination that technicals provide and the market can neither correct nor break out without the gravity wave of top down QE or QT. Suffice it to say that bulls in this market are betting on just one thing. Not better earnings, or a better economic outlook than most are projecting. There is only one question worth asking. Will the Fed be forced back into QE and when. So go asset prices. 

In the end, if QE infinity is the way, Tesla might be worth a laughable amount. But Chipotle will cost $100 a meal.