The recent index rally in the US has inspired many to applaud FED chairman Ben Bernanke for his pro-market fiscal policies. Peter Schiff, the CEO of Euro Pacific Capital points out in his recent article that market performance “is now almost completely correlated to Fed activism”. Indeed, market rallies, as with S&P 500 and Dow Jones, tell us more about investor confidence and very little about actual economic health of country and the companies listed in these indexes. Schiff argues that all recent market rallies are preceded by fresh stimulants from the FED and thus the markets fall when the stimulus tab runs dry.

For the investor, it’s imperative to know which variables to look at before investing. If Schiff is correct, markets will surge after Bernanke’s next decision to stimulate the economy. In other words, a case can be made that the rallies we are currently witnessing are largely artificial. Stock-investing is a powerful and historically efficient tool to boost the economy, but if Schiff is right, the only this investors are boosting is a big fat bubble - wholly dependent on the government’s economic policies.