QE BUT DON’T CALL IT QE
—Despite major indices still range-bound…despite the internals nowhere near the strength of the big 4 indices…despite the clear lack of leadership…despite the clear lack of new yearly highs….”QE BUT DON’T CALL IT QE” is here. We are calling it “QE BUT DON’T CALL IT QE” because that is what Jay Powell told us. “DO NOT CALL IT QE!” Jay Powell is the latest from DC to think we are stupid.—-
—-But we know better. The old line “if it looks like a duck” comes into play here. In case you did not know, Powell has announced the buying of a measly $60 billion/month for the next few months of treasury bills. This on top of the multiple rate cuts and daily repo operations. (look that up)—–
—-He’s not stupid. Remember what we have not just told you but showed you. Powell leaked a change of stance on Christmas eve as markets continued to swoon. He leaked going from “more rate hikes” to “patience” as he recognized the tightening was causing a collapse in the markets. Markets bottomed the next day. Markets rallied into the end of April. But May saw a 6-10% drop depending on which index you follow. It was at that point Powell sent out his mouthpiece James Bullard to state he could see the fed going from “patience” to “lowering of rates!” Markets again bottomed immediately. Powell confirmed the leak just a few days later. Powell could not even stand a measly 6-10% drop.—-
—-But every attempted breakout has failed. Internals remain horrid. Foreign markets just aint happening. All this while negative rates pervade the world, while many developed countries continue to lower rates, while some countries with negative rates are even lowering more. So what to do? Play catch up. In other words…”QE BUT DON’T CALL IT QE!”—–
—-The bottom line is that markets have loved these moves for 10 years. Since last Christmas, every move up in the market was started by another round of easier money by a man who says he is not about easy money. It has been the market’s default setting. The fed goes easier…JUST BUY! Jay Powell sees that the DOW hasnt moved since January 2018. Jay Powell sees that the Russell 2000 is trading where it was 2 years ago so let’s just go “QE BUT DON’T CALL IT QE”—–
—–We are not on our toes because of a China trade deal that’s a 2-3 on a scale of 1-10. We are not on our toes because of stock buybacks. We are certainly not on our toes in an earning’s reporting period where earnings will be down. (Of course, the number will be beaten!) We are on our toes because Jay Powell has gone full Bernanke…and markets have responded positively for 10 years. Let’s just say with this latest round of “QE BUT DON’T CALL IT QE” combined with upcoming seasonal strength, markets had better respond.—–