As the medical crisis created an economic crisis, the risk-takers are made whole and in the process eroded public support and crippled efforts to limit the long-run damage precipitated by COVID-19. The government embarked on ambitious and dubious acts to protect the rich but failed to produce observable short-term “successes” in the economic data. Meanwhile, the stock market red hot.
Since coronavirus pandemic blindsided the stock market, the Federal Reserve was more concerned to save the risk-takers and the expense to provide a safety net for the general public. Fifteen trillion dollars later, Federal Reserve’s stimulus programs guarantee the March 23 lows in the stock market as tracked by the S&P 500 Index at 2,191.86 to be worst of it.
From our articles and email replies, G-101 algorithms proved to be the very few who called the S&P 500 Index ’20 bottom and signaling a major buy signal. Of the top 100 investment banking firms and equity houses, not one had it right and continued to “advise selling the market." (data collected on March 23, 2020)
Indeed, the Fed’s aggressive response to the economic contraction raised stock prices and will continue to do so. New market highs will be commonplace in 2020 and 2021.
• On March 17, the Federal Reserve announced that it would start buying commercial paper.
• On March 18, the Fed announced it would be providing credit to the money markets.
• On March 19, it created yet another credit and lending facility focused on currency swaps.
• On March 20, it created a program to purchase municipal debt.
• On March 23, it expanded its original quantitative easing program to in effect remove the limit on how many assets the Fed could purchase.
• Going forward, expect $2 trillion a month to be Federal Reserve policy.
For now, the government has public support for relief efforts but will vanish if the government isn’t transparent and accountable. The risk-takers are getting a V-shape recovery and discounting the likelihood that most of us will be forming a bread line.