AFMC - Fed Interference Makes Markets Hard To Predict

2024-04-19 12:31:19 ET

Summary

• The Fed has implemented backdoor quantitative easing through bank bailouts and subsidies in the overnight repo market, distorting the stock market.
• Promised rate cuts by the Fed may not materialize due to the record amount of Treasuries being sold and rising interest rates.
• Selling off US oil reserves and interfering in global fuel markets has contributed to lower-than-expected inflation but may lead to inflationary pressures.

In the course of stamping out every flickering brush fire on Wall Street over the past couple of years, the Fed has engineered at least two backdoor QEs—one in the form of large bank bailouts and another in the form of generous Overnight Repo Facility subsidies. In addition, the Fed has pumped up investor confidence on Wall Street by repeatedly promising (though not yet delivering) somewhere between 3 to 5 rate cuts this year.

While some of the Fed’s moves were telegraphed far in advance—like quantitative tightening and raising interest rates—other maneuvers that had just as much, if not more, impact on the stock market were done either subtly, or in near secrecy....

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