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Biderman: Equities are Dependent on the Fed and Not Value

“The trend for the stock market is going to be lower and lower so long as the Federal Reserve continues with its asset-tapering strategy, according to Charles Biderman, chairman of TrimTabs Investment Research.

Equity prices are dependent on the Fed, and not on the value of the companies that make up the market, Biderman told Yahoo.

“The bull market is solely due in my opinion to the Fed pumping money . . . more money chasing fewer shares. And the more money has come from the Fed.”

Biderman was surprised that very little new money has flowed into equities in January via mutual funds and exchange-traded funds. He said investors may have decided the economy is not growing that strongly and that ripple effects from declining emerging markets are taking effect.

But he suggested the fact the Fed has commenced cutting back its monthly asset purchases is definitely playing an outsized role. “If the Fed keeps tapering, the market will keep going down. If they stop the tapering and start printing again, then we’ll see a huge rally.” …”

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