Over the last four years. movements in the direction of stocks have been well correlated with movements in the size of the Federal Reserve's balance sheet. Additionally, the magnitude of the moves in stocks have been well correlated with changes in the Fed's balance sheet. Int he chart below, we show the 1 quarter difference in commercial bank excess reserves held on deposit at the Fed and the percent of stocks in the MSCI World index above their 200 day moving average. As the Fed has been increasing its balance sheet by roughly $250 billion a quarter this year, stocks have held in overbought territory, with between 60-80% of all 1,600 companies in the MSCI World index above their 200 day moving average.