-- Liquidity. Central bank easing has provided the liquidity to the capital markets. Without it, an important source of demand for long-dated assets (stocks) is eliminated or reduced.
Profits are dependent upon global prosperity. The largest U.S. corporations are important exporters. This is particularly true of our technology companies. Large S&P companies are reliant/somewhat dependent on the health of Europe and other markets around the world. Their health is important to overall corporate profitability.
-- U.S. economic growth. Four years of easing has failed to produce much more than +2% real growth domestically. The uncertainty of a non-self-sustaining recovery will weigh on stocks if QE is tapered.
-- Interest rate cliff. Tapering could result in ever higher rates. Our consumers, corporations and government are addicted to low rates. Moreover every discount dividend model depends on a cap or interest rate. Higher rates, in theory, reduce the value of future cash flows. Here is my previous column on the interest rate cliff.In other words, Jimmy, no corporation is an island! Never in history has our domestic growth trajectory been so dependent on policy, especially monetary. We are in an experiment, a big experiment. Buffett told the audience in Omaha in May that he knows not how they exit this experiment nor what the ramifications might be. There are other reasons why macro is important, but the above are some of the major reasons.