The total value of the U.S. stocks from Q1 2009 to Q3 2012 increased by $12 trillion to $26 trillion, Dr. Ed Yardeni said in his blog, citing his own calculations and the U.S. Federal Reserve data.
On a chart released by the economist it can be seen that the overall value of stocks reached its local maximum of almost $27 trillion in the second half of 2007 followed by the financial crisis and a price collapse.
The market capitalization of the Wilshire 5000 Index, one of the biggest financial indices, increased by $9.2 trillion to $16 trillion. The cost of shares comprising the S&P 500 Index rose to $13.6 trillion.
The total value of shares owned by individuals advanced to $9.8 trillion from $4.7 trillion over the same time period.
Yardeni clarifies that the U.S. Fed’s Bernanke explicitly stated that his QE monetary policies were aimed at boosting stock prices, resulting in a positive wealth effect on consumer spending. According to Dr. Ed Yardeni, stock and real estate quotes rose amid worries that the Fed is “pumping air into asset bubbles.”
Earlier reports from multiple sources claimed that the third round of quantitative easing “can create bubbles in asset prices.” In particular, Hong Kong's central bank head Norman Chan said that QE3 could increase the risk of overheating in the peninsula’s asset market. Moreover, analysts mentioned the overvaluation of construction companies’ shares and excessive rise in the U.S. housing market.
