If you’ve paid attention, you know we’ve been talking about a Fed-sparked crash for a long time now.
Earlier this week, we talked about how we’re essentially experiencing it right now.
The market is instinctively fearful, so it’s going to react before things actually happen any time there’s a bad rumor or a scary headline.
So this crash we’ve experienced since the start of the year, that’s a Fed-caused crash.
The only question is, are we near the end of it, or will it keep going?
One former Fed President spoke recently and implied that we may be readying for a bigger decline because the market hasn’t really prepared for how far Chairman Powell will go.
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Former Dallas Fed President Richard Fischer spoke on CNBC, and explained that the market has been wearing “beer googles for years” when it comes to the Fed.
In short, he argued that the market still believes that the Fed will ultimately bail them out, no matter what policy they talk about implementing.
"...The market is getting ahead of itself, because the market is dependent on Fed largess... and we made it that way...but we have to consider, through a statement rather than an action, that we must wean the market off its dependency on a Fed put."
The “Fed put” is the market’s belief that the Fed will inevitably intervene and prevent major loses in the event of a downturn.
But Fischer argued that Powell in particular is willing to let the bears ride for a while as long as there isn’t a major impact on the “real” economy.
It was a pretty interesting article, you can read more here.
There’s no question that the relationship between the market and the Fed borders on toxic.
But predicting people’s emotions is always impossible. That’s why I take it out of my trading and focus on technicals.
Jeffry Turnmire and InvestPub do not provide investment advice. Trading involves a substantial risk of loss and is not suitable for all investors. Many traders fail and you should not trade with money you cannot afford to lose. If you need personal financial advice, consult a financial advisor.
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