On November 3, the U.S. stock market is slated to face conditions it has not had to endure in more than three years. For it is on this date a mere five and a half months away and after an extended period of tapering that the Fed’s QE3 stimulus program is expected to come to an end. And with this ending, stocks are projected for the first time since September 30, 2011 to have to trade not only without the steady injection of liquidity through asset purchases from the Federal Reserve, but also without the duration extending support from their past Operation Twist programs. It is even open for discussion as to whether the Fed will continue to reinvest the principal payments associated with maturing agency debt and agency MBS on their balance sheet as they have in the past during the post crisis period. Given how dependent the stock market has been on Fed stimulus in the years since the financial crisis, this quickly approaching day raises an important question for investors. Can the stock market stand naked without the cloak of security so continuously provided by the Fed these past many years?
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