Stocks continue rising and ignoring depressing news. The Federal Reserve is the primary driver. We explain what the Fed is doing, why it is not QE and what’s next for stocks.
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- A quick history for Fed action: The Federal Reserve is not only moving rates but also modifying its balance sheet – squeezing and enlarging it once again.
- Repo market operations: The recent rise in the Fed’s bond holdings is of short term bonds – and this makes a substantial difference. The bank’s intervention to lower repo rates is therefore NOT QE.
- Stocks rally: Coronavirus, the global slowdown, and other factors are not stopping equities, at least not in the US. Can this continue?
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