That's contrary to the conventional Street wisdom which ties the low rates and money-printing to a market bull run that is less than a month away from its 11th anniversary
But the analysis also reflects a tightrope Fed officials are trying to walk in which they want to keep policy accommodative enough to maintain the economic expansion while not fueling bubbles.
"They think that valuations are justified because rates are so low," said Danielle DiMartino Booth, who was an advisor to former Dallas Fed President Richard Fisher and now is CEO of Quill Intelligence. "At the risk of saying it's different this time, I think the Fed is not factoring in its own policy in its risk premium calculus."that he is not very concerned about where the market stands.
"It doesn't really work well to put blinders on. That's what it feels like officials are doing," Booth said. "With interest rates so low, you wonder what the next shock to the system will be. They're running out of ammunition." Fed officials contend that the most recent leg up for the market has been more about the dovish rate stance members adopted in 2019. Others have argued that bond buying, if nothing else, acts as a signaling device for the market that the Fed is going to keep policy accommodative. When that stops, market expectations change.
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