As investors in the US and around the world confront the fact that the Federal Reserve is never really out of ammo, One River Asset Management Founder Eric Peters joined Erik Townsend for an interview on Townsend’s weekly MacroVoices podcast, which features in-depth interviews with portfolio managers and prominent figures in the wealth-management industry.
Markets finally rebounded last week after the fastest, most brutal selloff in modern history, a selloff that was inspired by the realization that half the world would need to stop to prevent millions from dying and hospitals from being absolutely overwhelmed like they were in Wuhan.
Fueling the enthusiasm, late last week, just before Peters’ interview, the Fed unleashed its latest program: a $2.3 trillion program that expanded liquidity to small businesses and municipalities alike – or at least that’s how Jay Powell marketed it.
With the Fed’s balance sheet on its way to $6 – and then $8 – trillion, Townsend asked Peters what he suspects will be the ultimate result of Powell & Co’s repeated interventions in credit markets, interventions that the market has come to depend on, especially now.
Whether or not the central bank’s decision is setting us up for an even more dramatic reversal later on no longer seems like a matter of speculation. The rapidity with which the market unraveled in March – erasing three years’ worth of artificially inflated gains in three weeks – is evidence of what happens when artificial supports finally give way, leaving chaos in their wake.
But at this point, actually swallowing the medicine is almost too painful a prospect to contemplate. Peters pointed out that it wasn’t just stocks that crashed. At points, corporate debt and gold have gotten hammered – the selling hasn’t been constrained to stocks.
…click on the above link to read the rest of the article…