The bias of the financial sector is inherent: Central banks, like most financial advisors, portfolio managers and media commentators, base most of their assessments on sell side research from investment banks. This is financially destructive because as DiMartino explains below, the self-enriching sell side agenda is to“make sure that all of your clients are always 100% long”. With a new chair heading the Fed this month, some say the central bank put backstopping financial markets is no longer assured.
The recent gut-wrenching drop in asset prices began on the first day of the job for new Federal Reserve Chairman Jerome Powell. How is Mr. Powell likely to react to a suddenly sick-looking market? Will he step in forcefully to reassure investors that there’s a “Powell put” in place as a backstop?
…Powell appears to be no large fan of continued quantitative easing, and has long been on the record as concerned about the eventual pain its unwind will cause. He very well may resist riding to the market’s rescue at this time, allowing natural market forces to finally have their way. Here is a direct audio link.
Personally, I doubt that any central bank head will have the personal fortitude to withstand hysterical demands for ‘intervention’ when markets correct sharply. But the call for central banks to do something, anything! happens every downturn, and still vicious bear markets have been a recurring part of each cycle. At some point misplaced confidence always fails, and repricing ensues, Fed notwithstanding.