So What's Really Going On Now?
What's really going on now in the markets? If you asked that question a month or so ago, you'd likely get a different answer than you would today.
For bonds, all the talk focused on rising bond yields/falling bond prices. Folks were say ing the bond bull market that began in 1980 was done. You're not hearing that so much now. Why? Blame the Fed. After crowing about raising interest rates, they've reversed course. Trump and lots of angry investors who got clipped in the fall, especially December's stock price plunge, seem to have gotten to Chairman Powell and his band of merry Fed Board Governors. They've stopped raising rates.
In fact, they've gone a step further. Not only that, but they've stopped their quantitative tightening, but it seems we may be in for another round of quantitative easing. Hard to believe that QE could be fired up again, but that does seem to be in the cards. With that, bond prices have surged. And - what's this? - could this put stocks back in their bull market mode yet again. After all, stocks love low interest rates. And today we're getting a surge after the latest rumor or improving talks between China and the U.S. regarding tariffs, along with China's claim their exports spiked.
The old saying "Don't fight the Fed" seems to apply here.
Then again, the shenanigans of first raising, then reversing the rate increases may not be the greatest news for those of us looking for some real direction for the eonomy. When rates were rising, and stocks were wobbling, it sure looked like world economies were stumbling, maybe even heading for recession. But now, with Fed policy shifting, along with that of all the other major central banks, from hawkish to dovish (the others stopped being hawkish before the Fed), we could see a surge in economic activity that would at the least put off any pending recession.
Along with bullish bonds and revived economic activity, it seems only logical that we could due for a major surge in stocks. Yep, that would be the famous "Melt Up" we've mentioned in the past. Could it be here now? Could be.
So what's really going on? Maybe the best answer is that the Fed has taken the bull by the horns - for stocks and bonds - lifted it up and gave it kick in the can. The bull may not have been naturally inclined to keep at it, but with the Fed's aggressive tampering, it's got no choice. For now, The Fed's actions override any other factors that were pushing weakening economies, a bear market in stocks and bonds. Not that these won't come back to haunt us in the not-so-distant future. They will. But that day isn't today.
For bonds, all the talk focused on rising bond yields/falling bond prices. Folks were say ing the bond bull market that began in 1980 was done. You're not hearing that so much now. Why? Blame the Fed. After crowing about raising interest rates, they've reversed course. Trump and lots of angry investors who got clipped in the fall, especially December's stock price plunge, seem to have gotten to Chairman Powell and his band of merry Fed Board Governors. They've stopped raising rates.
In fact, they've gone a step further. Not only that, but they've stopped their quantitative tightening, but it seems we may be in for another round of quantitative easing. Hard to believe that QE could be fired up again, but that does seem to be in the cards. With that, bond prices have surged. And - what's this? - could this put stocks back in their bull market mode yet again. After all, stocks love low interest rates. And today we're getting a surge after the latest rumor or improving talks between China and the U.S. regarding tariffs, along with China's claim their exports spiked.
The old saying "Don't fight the Fed" seems to apply here.
Then again, the shenanigans of first raising, then reversing the rate increases may not be the greatest news for those of us looking for some real direction for the eonomy. When rates were rising, and stocks were wobbling, it sure looked like world economies were stumbling, maybe even heading for recession. But now, with Fed policy shifting, along with that of all the other major central banks, from hawkish to dovish (the others stopped being hawkish before the Fed), we could see a surge in economic activity that would at the least put off any pending recession.
Along with bullish bonds and revived economic activity, it seems only logical that we could due for a major surge in stocks. Yep, that would be the famous "Melt Up" we've mentioned in the past. Could it be here now? Could be.
So what's really going on? Maybe the best answer is that the Fed has taken the bull by the horns - for stocks and bonds - lifted it up and gave it kick in the can. The bull may not have been naturally inclined to keep at it, but with the Fed's aggressive tampering, it's got no choice. For now, The Fed's actions override any other factors that were pushing weakening economies, a bear market in stocks and bonds. Not that these won't come back to haunt us in the not-so-distant future. They will. But that day isn't today.
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