There is a lot more to investing than the Federal Reserve and money printing. Central bankers set the tone, and their goal is to be accommodative to make stocks more attractive. However, what happens when they decide to move in the other direction? What happens when they remove the punch bowl?
The fact is, the Fed has a long history of moving too slow on removing accommodation, which inherently compounds problems when money is created out of thin air.
Fed Governor Jerome Powell took an even tone on future rate hikes and seems comfortable with just two more increases this year. Moreover, the market took its own comfort with Powell’s comments on whittling down the Fed balance sheet yesterday.
From its $4.5 trillion perch that hangs over the economy, and the market like the sword of Damocles, he thinks the Fed can get it to range from $2.4 trillion to $2.9 trillion by 2022. I have no problem with that, although I have little confidence it will happen without any hiccups.
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