For an inventory market to collapse, costs will have to go down. It’s obvious, but what happens if inventories overlook and the price of cash is going down?Is this a collapse? If the price of cash falls by 30% but the market site increases a little, is it a bullish place?
Few would question the assumption that it was the Fed’s liquidity inventories that levitating the US stock market. But it’s not the first time Unfortunately, in an attempt to prevent the entire economy from collapsing, it has inflated the price of stock market assets to ridiculous levels. Jay Powell, the fed’s president, made it clear in a recent interview that they were committed to supporting the US economy. And protect it from the effects of anti-Covid measures, as long as they are mandatory and both mandatory, and made it clear that it would be for a long time.
Here’s the trend of this Federal Reserve thing:
(Graphic courtesy of the Federal Reserve website)
This QE or the way you need to mark this liquidity provision (liquidity is equivalent to cash, the provision is equivalent to printing assets that are converted into money) will obviously work and work for a long time because every time the Fed slows down its new government support. exchange of new quality assets for the most abstract assets of others, collapses the inventory market and then increases QE to prevent the market from collapsing like Hindenburg on fire.
When the Fed fell in 2019, the market fell and the crisis hit peripheral global economies, while US dollars were absorbed through global economic plumbing. The United States and the global economy depend on the Fed’s financial impression. riskier, even riskier debt, the Fed is getting the world’s dubious asset holders out of the way, avoiding a spiral of insolvency. even greater fragility.
The question is this: if these liquidity operations continue, the Federal Reserve will in fact own all the homes of its citizens and all its solvent (and not-so-solvent) corporate debt and therefore have privileges over the maximum economic assets of its citizens. He will have nationalized, albeit probably by accident, the country, having bought it with government paper; However, if this process is stopped, the market will collapse and everyone will be immediately much poorer, while if it continues at some point. At that point, it will overload the market for its role, interest rates will rise and interest rates will go down. The price of bonds and the truth of a much poorer economy will bite.
However, it appears that the Fed will allow the inventory market to give way regardless of the outcome.
But if a dollar in 2023 or 2024 buys much less and the market has not soared accordingly, it will get its restart chronically than through an acute opportunity for 30% relief in its portfolio. This will once again be the goal of elegant procedure over a decade or two that end with pain in 3 years or more of restructuring.
But make no mistake, the U. S. stock market is a card space, and as the Malays discovered when they supported the value of tin, there is a finite nature to keep a stock market away from its herb balance and you have to spend expanding sums at some point, you run out of credits and the market place , the place where the place is located, is going down to its correct level. How long can the United States continue to degrade its credits while keeping its credibility high is the key factor in this ongoing drama, and all countries in its time have gone beyond this point and sunk into crisis. If the United States chooses to capture its market, this moment is fast approaching. With the search for QE, the formula will be even more fragile, so the catalyst needed to break through this constant corner of the market square, the cord will get smaller and smaller until the slightest elbow breaks the spell.
Inflation resolves all these disorders because it gives economic activity the flexibility to rebalance, as few can be aware of all other approaching prices. This encourages others to move their cash and crushes debt with genuine negative interest rates and also stealthily rebalances prices. genuine debt price. Inflation is known to turn on and off, even if central banks ridiculously claim otherwise.
But will the inventory market sink now? Hearing Jay Powell speak, it turns out they’re in a position to die on QE Hill. As a result, the market site will not be able to stick to your herbal course. This means that the market site will sink only when and if there is it will be a moment of fall. There will have to be a readjustment for a global economy that has lost at least 10% of its production and even more damage to come.
Some governments will focus on chronic economic progression, while others will opt for acute progression if they can blame or whatever.
As such, investors are praying that the new incoming US administration will be able to do so. But it’s not the first time Don’t find a scapegoat to blame for a reboot, to eliminate this at the beginning of your tenure.
For anyone other than a customer and an unconditional fork, the close to the long run will have to be one in which an investor’s hands remain flying near that sales button, because the balancer the Fed is walking for America’s smarts and the precarious global economy.
Clem Chambers is the CEO of the ADVFN. com personal investors’ online page and 101 tactics for deciding on inventory market winners and industry cryptocurrencies: a beginner’s guide
Chambers won the Journalist of the Year award in the business market commentary at the UK Institutional Press State Street awards in 2018.
I’m the CEO of ADVFN’s investment and equity site. In addition to running major money markets in Europe and South America, I am a prolific monetary writer.