But here's the thing. The rally started a month too early for the Fed's QE efforts to be responsible for it. Here, the Fed's latest QE efforts (let's call it QE 4.0) really only began properly on 12 December 2012. The rally, on the other hand, began after stock prices bottomed on 15 November 2012 - a month before the Fed announced it would expand its balance sheet and long after the previous generation QE 3.0 was initiated in August 2012.
So the Fed's quantitative easing isn't behind the stock market rally. Instead, we can demonstrate that investor expectations for future dividends is behind it.
Following the 6 November 2012 national elections in the U.S., influential investors began racing the clock to beat the expiration of low tax rates for dividends after the end of the year, which were now guaranteed thanks to the outcome of the elections.
Beginning on after the market's close of business on 15 November 2012, large numbers of U.S. companies began announcing that they would pay out extra or special dividends before the end of the year.
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