Tuesday, April 7, 2020 7:38 PM EDT
There is an investment adage that says, "Don't fight the Fed." Put simply, when the Fed is providing liquidity to the markets, it should be an overall positive for the stock market, and you should be invested. Historically, this meant investors should watch what the Fed is doing in terms of interest rate policy. Today, with the Fed already hacking the rate back to zero, investors have to look at quantitative easing and it is truly epic.
The street now expects the Fed to more than double the size of its balance sheet to $9-10 trillion in 2020. This is an incredible amount of liquidity being pumped into the market. The Fed is not only buying Treasuries and mortgage-backed securities but have now moved onto corporate and municipal bonds.
Here is a chart illustrating the parabolic pace of Fed buying. With stay at home orders crushing demand, the Fed is pulling out all stops to inject money into the financial markets. In just 3 weeks, the Fed has bought over $1.5 trillion in assets. This already outpaces QE2 and QE3 combined!
This has helped the recent rally from the interim market bottom, but can the Fed help the stock market defy gravity? That remains to be seen. If the economy is shut down through the summer, is there any limit to the Fed balance sheet?
Disclosure: Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no ...
more
Disclosure: Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Runnymede Capital Management, Inc.), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Runnymede Capital Management, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Runnymede Capital Management, Inc. is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of Runnymede Capital Management, Inc.’s current written disclosure statement discussing our advisory services and fees is available for review upon request.
less
How did you like this article? Let us know so we can better customize your reading experience.