Since Quantitative Easing (or QE) began, monetary policy hawks, both those maintaining a semblance of rationality and those forgoing it entirely, have cried that the rise of the market was due entirely to QE. Incessantly and tediously, they have promised stock investors that all will be lost the moment QE ends. Their particular perspective is something new in the American experience, as it combines the curmudgeony hatred of all things Keynesian with puerile infallibility and omniscience. Wrapped in a paper-thin nominal patriotism, their hatred of American society resembles nothing so much as the Byzantine Iconoclasm, in which millions of citizens chose to burn much of their own civilization to the ground in order, they believed, to save its soul. The shameful pitch of their doom wishing has been a pox on the market and a blight on public policy.
This ideology has, of course, already been undone, for it promises that QE must necessarily be accompanied by an inexorably rising price of gold. The collapse of the gold bubble turned down the volume from this group, but not by much. Sadly, gold's falling price has caused as many to sink into the morass of conspiracy theory as it has to reevaluate their views. It seems now that another reduction in their volume is needed in order to bring more sensible, but quieter voices back into the discussion, and the only thing left to do to bring that about is to continue tapering the QE; halting or reversing the QE will only stoke the embers of this dying fire.
The stock market is not so fragile as to be undone by a five percent correction, nor a ten percent correction, nor a twenty percent correction. Adjusted for dividends, the S&P 500 has risen almost exactly 150% since the era of QE began in November of 2008. Whatever pullback may occur as a result of ending QE will not, in any possible world, reverse that entire gain. Nor is a small pullback necessarily a bad thing. With the exception of those nearing retirement, investors have as much reason to wish for a market pullback as they do for a market advance. Many in the workforce, myself included, feel that the bulk of our fortunes have yet to be earned, and would see a market with lower valuations as nothing more than an opportunity to acquire more shares with the money we will be investing anyway.
By many accounts, Chairwoman Yellen, it was you, as much as any other, who charted the course we are now on. I wish merely to add my voice to the chorus of those who ask that you maintain it, dismissing market fluctuations for the random noise they are, and that you make it perfectly clear to the U.S. Congress that that is what you intend to do when you meet with them on Tuesday, February 11, 2014.
Julian Close has been a business writer since the first day of the twenty-first century, having written for PRA International and the United Nations Department of Peacekeeping. He graduated from Davidson College in 1993 and received a Master of Arts in Teaching from Mary Baldwin College in 2011. He became a stockbroker in 1993, but now works for Fresh Brewed Media and uses his powers only for good. You can see closing trades for all Julian's long and short positions and track his long term performance via twitter: @JulianClose_MIC.