Wolf Richter: The Era Of The Fed “Put” Is Over
To all those investors expecting the Fed to step in to backstop the recent weakness seen in the stock market, Wolf Richter warns: The cavalry isn’t coming. After years of force-feeding too much liquidity into world markets, the central banking cartel is now aware of the Franken-markets it has created. And now with a new head at the US Federal Reserve, and soon at the ECB, central bankers have shifted their priority from supporting asset prices to now actively engineering lower prices. They just don’t want prices to drop too far too fast. Of course, the big question is: how much control do they really have? The situation may very quickly get out of their hands. But the big takeaway is to expect lower prices across the board for nearly every “risk on” asset: stocks (including and especially the FANGS), corporate bonds and real estate. The Fed is working to reduce investor exuberance — and as many bloodied contrarian investors will warn you — Don’t fight the Fed.