The Financial Post reports in its Tuesday edition investors should focus on earnings and not the U.S. Federal Reserve's balance sheet when assessing stocks. The Post's Jonathan Ratner, writing in Trading Desk, says despite the popular belief that funds generated by the central bank's stimulus efforts are driving indexes to record highs, Scotiabank economist Derek Holt sees several reasons why this theory does not hold up. Mr. Holt says size of the Fed's balance sheet is not directly tied to the level of the stock market, adding that efforts to demonstrate this relationship typically use a specific sample period. For example, the postfinancial crisis period of 2009 onward shows a tight correlation between the Fed's balance sheet and the S&P 500, but the economist notes the relationship looks much weaker over a longer period of time. Mr. Holt also argues that if the stock market rally has been caused by the Fed's asset purchases, it would follow that a sharp decline in the S&P 500 as the Fed exits would translate into a large contraction in money supply. "That's highly unlikely unless large scale and concentrated asset sales occur, which broad agreement within the Fed reject," he told clients.