The Fed Did Nearly Nothing Today
Interest rate held at 0 to 1/4 %. Stock market continues to do nearly nothing.
OK, the most interesting thing they said was that they would hold the level of assets on the balance sheet nearly constant via buying treasuries as the mortgage holdings run off. That is monetizing the debt. Inflation is about 1%, so they are feeling like it’s safe to monetize AND are more worried about a drop of 1+% into deflation than they are about a rise of 1+% to a ‘near normal 2%’ inflation rate.
All very reasonable. Especially given that they expect the economy to remain sluggish.
But all this leaves the present ‘Sovereign Risk” of the present government spending binge and desire to tax business into poverty as the dominant issues. So we’re going to continue a bit of doldrums for a while longer. My guess is about the 2nd week of November…
OK, I’ll put up a WSW posting ‘soon’ now that this is out of the way.
My first blush is that the market will likely drift a tiny bit higher as folks come to expect a recovery, and then really start to rise if it looks like a Republican win is likely in November. (Please note: This says nothing about what I want from my government. It’s just a statement of what happens in this kind of context. One party running rampant and a swap to the other to restrain it results in improved markets. Republicans cutting some of the tax and regulation burden results in improved markets; just as it did when John Kennedy did the same thing… Why the present Democrats run from the lessons of JFK I’ll never know.)