The Fed – The Gift that Keeps on Giving

The Fed – The Gift that Keeps on Giving

The Federal Reserve provided the market, investors and the American people with yet another massive gift – a new $2.3 trillion stimulus package centered around new lending programs for small and midsize U.S. businesses. This is a big deal because for the first time that I can remember,  the Fed is forward looking and fighting this without limitations.

The credit markets have been in turmoil. These new lending programs  announced by the Fed clearly show that they are aware of the troubling signs in the credit markets, and that they are prepared to do anything and everything to protect against a further crisis in every area of credit.  One big addition in this lifeline is their expanded corporate bond buying programs to include debt downgraded from investment grade to high yield (aka junk bonds), after the crises hit. Thisshould help prevent bankruptcies caused by the Coronavirus.

I am impressed and overjoyed by the collective unity of America that “we are all in this together”. People are doing their part and the government is doing its part. Best of all the independent Federal Reserve is doing everything possible to avoid a false start once we recover and firm up the all important credit markets, which is the lifeblood of our economy.

Honestly, I didn’t think it was possible. What a great country we live in! The “Great Reset” is going to be a success.

We are not out of the woods yet. The economic shutdown was so rapid and dramatic that it has yet to show up in most economic releases yet. That means that the “news” is going to get worse… not only regarding the personal and societal devastation caused by this pandemic, but on the financial damage which will shock markets and investors.

However, as I have said, markets bottom and turn up well before the bad news is over. With the massive monetary and fiscal stimulus supporting the recovery, it is unlikely that we will need to re-test the March lows. We are definitely due for a pullback at some point, probably soon, so be prepared (just not all the way back as I was fearing).

Don’t try to trade here. You would be going against the #1 rule in investing – “Don’t fight the Fed!”.

For now, let’s enjoy this rally and do our best to stay healthy, do our best to help others, and listen to health professionals and follow their recommendations.

If you need me for any reason, do not hesitate to contact me. I am still working at the office, with a skeleton staff, and we are all working tirelessly to guide and protect you during this most difficult time.

Thank you for your trust, confidence, and friendship.

 

“Invest for need, not for greed!”

Sincerely -Keith

916-925-8900

Smart Money Newsletter

Written By: Keith Springer

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