• Bob Brooks

Another Stock Market Concern

There are many analogies that one could use for the stock market. For this story, I liken the stock market to a drug addict. The Federal Reserve Board is the drug supplier. The market has been on a 10 year bull market run. At the same time, that bull market or the addict was fueled by the Federal Reserve Board keeping rates near zero and stepping in to inject as much stimulus into the economy as possible. This is the stock market's favorite drug of choice.

Towards the end of an addiction the addict will do anything for the drug. The Federal Reserve Board met last week to discuss whether or not they were going to change interest rates. They did nothing and the stock market reacted negatively to it. The stock market wanted the Fed to lower interest rates. Here is the insanity that goes along with that notion:

The Fed only lowers interest rates when the economy is in trouble.

According to Trump this is the best economy since Biblical times. It would make no sense to lower interest rates, especially aggressively lower interest rates, when the economy is so "outstanding." If that were to happen, we would create the biggest stock market bubble of all times.

President Trump is calling for it.

President Trump is doing whatever he can to pump up the stock market. He flaunts that as one of his accomplishments. In other words, he is enabling the addict at any cost. Having him upset with the Fed because they wouldn't lower rates is complete insanity. No, I am not hating on Trump. I voted for him and support our President. His decision making just doesn't make sense at all sometimes.     

The Fed should be RAISING rates not lowering them.

Unless the Fed moves rates higher, the Fed is not going to have anything to lower WHEN we go back into another recession. The economy cycles and will continue to do whether Trump is President or not. The fed has very little ammo with rates being already so low.  

When common sense leaves the building, it is always a sign that the end is near for the bull market. Know your risk level and be happy with it.