“Equity markets are more addicted to monetary easing than ever. It’s scary to contemplate how much pain will be necessary to cure the markets of its addiction,” MktwHulbert writes.
Finally, investors have a good reason for why the U.S. stock market will suffer above-average volatility and below-average performance this month: It’s the Fed.
Even fewer advisers are focusing on the central-bank tightening now occurring globally. Vincent Deluard, director of global macro at StoneX Financial, wrote this week in a note to clients that “the Swiss National Bank and the PBOC [People’s Bank of China] have started to aggressively shrink their bloated balance sheets.
It’s a bad sign that the stock market has already declined so much in the wake of a modest dip in the Fed’s balance sheet. This suggests that equity markets are more addicted to monetary easing than ever. It’s scary to contemplate how much pain will be necessary to cure the markets of its addiction.