A Quote by Martin Zweig
Monetary conditions exert an enormous influence on stock prices. Indeed, the monetary climate - primarily the trend in interest rates and Federal Reserve policy - is the dominant factor in determining the stock market's major direction.
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The underlying strategy of the Fed is to tell people, "Do you want your money to lose value in the bank, or do you want to put it in the stock market?" They're trying to push money into the stock market, into hedge funds, to temporarily bid up prices. Then, all of a sudden, the Fed can raise interest rates, let the stock market prices collapse and the people will lose even more in the stock market than they would have by the negative interest rates in the bank. So it's a pro-Wall Street financial engineering gimmick.
Since 2008 you've had the largest bond market rally in history, as the Federal Reserve flooded the economy with quantitative easing to drive down interest rates. Driving down the interest rates creates a boom in the stock market, and also the real estate market. The resulting capital gains not treated as income.
Stronger productivity growth would tend to raise the average level of interest rates and, therefore, would provide the Federal Reserve with greater scope to ease monetary policy in the event of a recession.
The supply-side effect of a restrictive monetary policy is likely to be perverse, in that high interest rates enter into costs and thus exert inflationary pressure.
Transparency concerning the Federal Reserve's conduct of monetary policy is desirable because better public understanding enhances the effectiveness of policy. More important, however, is that transparent communications reflect the Federal Reserve's commitment to accountability within our democratic system of government.
The degree of monetary policy ease should be associated with the level of real interest rates, not nominal interest rates.
It is understandable that the Fed injects cash to avoid the collapse of the stock market, but basically it is bad policy for monetary authorities to intervene to save speculators from bankruptcy. This is not their role.
Monetary policy has less room to maneuver when interest rates are close to zero, while expansionary fiscal policy is likely both more effective and less costly in terms of increased debt burden when interest rates are pinned at low levels.
The supply-side effect of a restrictive monetary policy, moreover, is likely to be perverse. High interest rates enter into costs and thus exert inflationary pressure, as well as inhibiting the expansion of capacity or the introduction of cost -reducing capital improvements.
Stock price multiples are negatively correlated with real interest rates. As interest rates rise, the market multiple will fall.
We do not interpret bitcoin's popularity as having a relationship with the public's view of the Federal Reserve's conduct of monetary policy
Monetary policy transmission encompasses the whole continuum of interest rates; of course, the central bank only determines the overnight policy rate.
Nobody can predict interest rates, the future direction of the economy or the stock market. Dismiss all such forecasts and concentrate on what's actually happening to the companies in which you've invested
The reality is that business and investment spending are the true leading indicators of the economy and the stock market. If you want to know where the stock market is headed, forget about consumer spending and retail sales figures. Look to business spending, price inflation, interest rates, and productivity gains.
Speculators are obsessed with predicting: guessing the direction of stock prices. Every morning on cable television, every afternoon on the stock market report, every weekend in Barron's, every week in dozens of market newsletters, and whenever business people get together. In reality, no one knows what the market will do; trying to predict it is a waste of time, and investing based upon that prediction is a purely speculative undertaking.
We own? the Federal Reserve. There is this misconception that the Federal Reserve is some private entity. But if I might give an analogy here, we - U.S. taxpayers - own all the stock in the Federal Reserve.
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