To be repetitive:
Powell leaked his change of stance on Christmas eve from “raising rates” in 2019 to “patience!”. Markets bottomed immediately. Powell confirmed the leak a few days later. Markets rallied into the end of April before a whopping 6-10% correction into the end of May. Powell again leaked another change of stance from “patience” to “lowering of rates!” Markets immediately bottomed  again. Powell confirmed the leak a few days later. Powell then lowered rates…and lowered rates…and lowered rates. But markets just moved back and forth. What to do? Even with the rate cuts, markets were not cooperating. Markets fell into the beginning of October. What to do?
Word leaked out around October 3rd that there was consideration for some sort of QE.  What? QE with 3.6% unemployment and with markets up 15-20% on the year? Markets bottomed that day. AND  on October 8th, not with an announcement but in an interview at some sort of economic’s club, Powell confirmed QE BUT DON’T CALL IT QE. It wasn’t any ordinary QE but as of this writing, Powell is on a run rate of over $1.5 trillion of printed money for the next year. This is more than Bernanke’s ($1 trillion) QE at its most. Just keep in mind, Bernanke printed money when unemployment was in the high single digits and when we still did not know if our financial system was stable. What is Powell’s excuse doing this at 3.6% unemployment and with markets near highs? It’s called NOTHING IS BAD AS LONG AS MARKETS GO UP. It just took Powell time to figure it out.
The day we heard about this latest QE, we told you to expect another leg up in the market. This was based on the fact the markets have loved QE and easier money since the 09 lows. This was based on the fact we were heading into a seasonal strength period. This was based on the fact that there was a ton of cash on the sidelines. Markets did indeed bottom again…TO THE DAY. The breakout of the big 4 indices combined with seasonality and cash on the sidelines continues to solidify the move. Notice the persistence. Notice we cannot even get a 1% pullback. “QE BUT DON’T CALL IT QE” to the tune of over $100 billion/month (not a typo) does work. Keep in mind, just about everywhere around the globe, central banks are easing, have negative rates or are also printing. Germany is in recession but the German Dax is at new yearly highs.
None of this is to throw cold water on price. We are just letting you know markets are up significantly this year with pretty much no earnings gains. Since markets are about earnings and interest rates, guess what is doing the trick? Jay Powell just effectively lowered rates 10 times with his “QE BUT DON’T CALL IT QE!” Notwithstanding pullbacks, which can occur at any moment, we expect higher prices into the end of the year. Even the lagging RUSSELL 2000 (small caps) has finally moved above its intermediate term resistance. Poor earnings continue to be bought while strong earnings get gapped to the upside. As always, if we start to see any changes, we will let you know…but so far, the ridiculous easier money wins out again.

One Comment


    Our hospital is getting bought out (but don’t call it a buyout, it’s a merger). Not everyone’s job is being retained and the news just went out these last two weeks.
    Taking your advise, I anonymously dropped a Happy Thanksgiving post-it attached to a Benjamin on one of our unlucky coworker’s desk.

    Happy Thanksgiving Gary!

Comments are closed.