The Fed has officially been on a buying rampage, with no end in sight. The last few months, humanity has never seen a global economic lock down to such a degree that we’re now seeing record job losses, bankruptcies, and growth contraction. The results of lock-downs are incredibly stark and sobering, and Covid-19 is about to set off another wave of infections. Yet, as we are on the heels of a depression, the Fed is taking the responsibility of “saving the market” by buying equities ETF’s and corporate bonds – something it has never done before.
In other words, when reports of record unemployment rates (not just temporary losses, but job losses that are now becoming permanent) the Fed’s response was to buy. When we heard reports of record slowing of GDP growth, the Fed’s response was to buy. When we heard reports of businesses permanently going bankrupt due to the lock-downs, the Fed’s response was to buy.
Are we going to see a Fed so out of touch with the economy, that it will continue to buy the market no matter how grim the reality is? Have we gotten so used to the Fed coming to the markets’ rescue, that we fail to factor that a depression is even possible? Could it be that we could see 50% of Americans out of work, 50% of businesses shut down, and riots and violence plague our cities and we will still have a Fed whose continued response will be to BUY the markets? What is the point of a 3000 S&P 500 when we have 90% of the population standing in bread lines?
Welcome to dystopian America. Markets are straying further and further away from the fundamentals, while our economy continues reeling in the effects of a pandemic that refuses to go away. The Fed is going out of it’s way to prop up markets and “too big too fail” companies that they have no business meddling in. At what point do we realize that for a false sense of security, we are sacrificing the success of every future generation after us? At what point do we realize that a momentary record high in equities markets mean very little when Americans are struggling to survive? I’m no Harvard graduate, and my skills in mathematics are average. Yet even I can see that a Fed-pumped and overbought equities market will NEVER solve the real issues we face. What could possibly go wrong?