Investors’ goal is to make money consistently in all market conditions — amid rampant speculation, a good or bad economy, a pandemic, varied Federal Reserve policies.
It’s time for investors who have made money in the stock market over the past decade to say thank you to the Fed for printing fake money, but now comes the hard part.
At Wednesday’s press conference, Fed Chairman Jerome Powell was adamant in that, irrespective of bubbles in the stock market or good economic data, the Fed is set on a course to print money and keep interest rates at zero through 2022.
Here is the most striking statement: “We’re not thinking about raising rates. We’re not even thinking about thinking about raising rates.” Notice the double emphasis on “thinking about.”
It’s a big milestone. Finally the tutoring of the Fed, supposedly an independent body, by politicians is complete — it’s all about “not thinking” — not thinking about how to ultimately unwind the massive balance sheet the Fed is building and the massive national debt that politicians are happy to undertake.
What does it mean for stock market investors? In theory, it will lead to rampant stock market speculation in the short term and a massive crash down the road.
In the very short term, the stock market is very overbought, and overbought markets tend to be vulnerable to the downside. Further, we have been sharing with you that proprietary sentiment indicators at The Arora Report have been in the extreme zone.
Sentiment is a contrary indicator at extremes. In plain English, this means that when sentiment is extremely bullish, it’s a sell signal.
Market Watch / ABC Flash Point News 2020.