For those new to this game, it never used to be like this. Before the dot com bubble bursted the Fed was more or less a passive thought in the big scheme of things, tweaking rates here or there but for the most part no one paid too much attention to them. The Fed was always important, but we didn’t rely upon them for our stock prices. Stocks were guided up and down by earnings and analyst upgrades/downgrades and mergers and rumors of takeovers. Today, because of the zero rate environment, all we care about is what the Fed is going to do next.
The reason why we are so reliant upon them is because we died in 2008 and the Fed replaced the economy with a Frankenstein bastardized version of something that should never have been created. Gone are the days when you could receive 5% interest in your savings account, even higher for a CD. Now you get NOTHING and if you want to earn a rate of return you must invest in stocks or bonds. The Fed has created a monster and every time they try to put the genie back into the bottle, said genie gets irate and does malevolent things.
Today is a Fed day and we all wonder what can the Fed do with CPI at 7% and stocks down 40% off their 52 week highs? I think the answer is obvious — they should not be in a position to do anything. But they will and they shall ignore their mandate in favor of saving stocks. My confidence in this isn’t high, only because it defies logic and reason. But we are talking about the Fed here, not an organization with integrity.
Futures are way up and I suspect if the Fed accommodates traders we shall continue to go way up. But if the Fed sticks to their guns and tells us they mean business — this entire rally might wash away.
Decisions decisions.If you enjoy the content at iBankCoin, please follow us on Twitter