Robert P. Balan Blog | The Correlations Between The Fed's Balance Sheet And S&P 500 Comp Index And VIX Becomes Even Tighter | TalkMarkets
Managing Owner and CIO, Predictive Analytic Models (PAM)
Robert P. Balan runs Predictive Analytic Models, #1-rated trading unit at Seeking Alpha. PAM trades Swiss HF funds using Federal Reserve, US Treasury, and term (money) market liquidity data flows as basis for trading decisions. He is domiciled in Zurich, Switzerland. Robert Balan 5 decades of ...more

The Correlations Between The Fed's Balance Sheet And S&P 500 Comp Index And VIX Becomes Even Tighter

Date: Saturday, May 29, 2021 3:40 AM EDT

Original post:___https://twitter.com/RobertPBalan1/status/1398537810064384001?s=20 ----

1/2 Updating the charts that had my eyes popping: Changes in the Fed balance sheet Granger-causes VIX changes (0.93, corr coef., from 0.926), and explains 86.6% of (R^2), from 86.3%, from March 16, 2020, to-date (below).

 

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2/2 There's now increased corr coef between Fed balance sheet and SPX (0.933, from .914), higher R^2 (87.0% from 83.5%) when there's a 3-week lag. Numbers are weaker w/ no lag I see this lagged effect in my model work. Fed B/S changes impact SPX to max effect only after 3 weeks.Image

 

 

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