Chart shows single biggest driver for the US market — it’s not Trump, or even the China trade war


Market Watch: After days of trade-war doom and gloom, a wave of optimism has spread across global markets after the first day of talks between the U.S. and China.

U.S. President Donald Trump professed that negotiations were “going very well” as he planned to meet with Chinese Vice Premier Liu He on Friday.

De-escalation in one conflict was followed up by escalation in another.

Iran said one of its oil tankers was hit by two rockets off the coast of Saudi Arabia, sending crude prices surging.

However, our chart of the day suggests that, regardless of geopolitical tensions and global uncertainty, the Federal Reserve will still run the show. more …

Opinion: Friday’s early headline …

Goldman Expects QE4 To Start With A Bang: The Fed Will Buy $60BN Monthly For 4 Months

… tells us loud and clear that the Federal Reserve is ready to keep printing money in the same manner as 2009 but are unwilling to call it what it is … Quantitative Easing.

And the Fed has a a veritable alphabet soup of monetary policy tools (QE, OMT, TLTRO, APP, ABCP…); the result is that no asset class is free of distortion, including the key markets of foreign exchange and corporate debt.

All these tools are only more of the same: they apply the same means (create new money out of thin air) to reach the same end (artificially decrease the interest rate). source

Since there is an unlimited amount of money via the printing press, it would appear the stock market rally could theoretically go on forever. When was the last time anyone even thought about balancing the budget, or reducing soaring deficits?

Last Friday’s stock market was from the theater of the absurd. The Goldman headline of $60 billion per month in stimulus early in the day caused institutional algorithms to go on a buying spree, and when combined with positive tweets from Washington, with dubious reports of a China trade deal, the Dow Jones Index rallied nearly 600 points. At around 3:30 PM sanity prevailed, and the market began selling off over 200 points into the closing bell.

Have we lost our minds? Debt is at nose bleed levels and neither party cares to notice. So let the good times roll, what could go wrong?