Today at the press conference after the FOMC meeting, Jerome Powell indicated that the FED would raise interest rates by 25 basis points and guess what happened?
For the past 6 months the FED has raised rates and the market has tanked. The SPY and the QQQ are down 35% since the beginning of 2022.
Rate hikes in the past sent the market into the tank.
Now a rate hike is sending the market to the moon.
What’s up with that?
Well if you listened carefully, you heard Chairman Powell say that congress needed to raise the debt ceiling or bad things would happen.
And that the FED is the fiscal agent of the Treasury, which means the FED will monetize the new “debt limit”.
This means of course the FED will issue the money needed to pay the new Debt ceiling.
If the Fed helping out the Treasury in the past was inflationary and the market loved it, what do you think will happen to the market this time?
Almost like clockwork as Chairman Powell said the magic word “fiscal agent”, the NASDAQ rose 250 points.
As of the time I write this the NASDAQ is now up 360 points. So much for rate hikes having anything to do with inflation. It’s all a cover for congress to spend, spend, spend.
And to hell with the rest of us.
Heck what’s another trillion dollars of debt. That’s right…$1,000,000,000,000. Chump change when you’ve got the trusty FED at you back.
When you can’t help an economy grow in any real sense, just borrow more money and spend your way to oblivion. I guess we’ll have to see if in fact the market will revert to it’s underlying fundamentals.
Maybe by tomorrow morning, when the markets have had a chance to digest the new largess and realize this is NOT a really good deal, the NASDAQ and the S&P will come back to earth.
In the meantime enjoy the punch bowl and all the freebies coming down the pike.
Many really smart people have been saying that none of what we are seeing has anything to do with inflation.
I’m beginning to think they are hitting a bullseye.
Until next time, be safe and trade appropriately.