In this latest issue of my weekly podcast, we discuss the current state of the market. The S&P 500 is closing in on its previous high of 3386.15 on February 19, 2020. This is despite the biggest and fastest hit to global production and employment in history.
So why are equities so buoyant? Well, let's start with nearly $3 trillion in liquidity added to the Fed's balance sheet plus another nearly 3$ trillion added thus far this year in deficit spending. This has kept asset values stable and disposable personal income rising. Right now, the expectations are that the fiscal stimulus--though temporarily interrupted last week--will very shortly recommence since the American public wants it and neither political party wants to be blamed for stopping it.
It is also expected that the pandemic, which came back to life in July, will abate in the near future and that we won't get a big second wave in the fall. Meanwhile, by nailing the yield curve to the floor and promising to keep it there for a couple of years, the Fed is reassuring investors that the return on low-risk assets will be near-zero… no better than holding cash. And with the rest of the world in roughly the same shape, where else are investors supposed to turn?
Yes, there are scenarios--economic, political, and geopolitical--that could derail this outlook. And we'll be looking at them in future podcasts.
But not in this podcast. This time, we're going to replay my conversation yesterday with JT Taylor, Hedgeye's Chief Political Strategist, on stimulus and the 2020 elections. If you missed the webcast CLICK HERE for video & audio replays.
Demography Unplugged subscribers CLICK HERE for the audio file.
As always, please send questions or suggestions to . Yes, I do respond to all emails personally!
