Passage of the $1.9 trillion stimulus package means one thing for sure: the stock market is about to re-ignite with the new impetus.
To discern the effect of the stimulus package on the stock market and other assets, we need only harken back to March 2020, when another trillion-dollar stimulus package was launched.
CNN reported on March 20, 2020:
“South Korea’s Kospi (KOSPI) shot up by 7.4%, recording its first gains since March 10. Hong Kong’s Hang Seng Index (HSI) increased 5%, while the Shanghai Composite rose 1.6%. Europe followed suit, with the FTSE 100 (UKX) adding 2% in early trading in London. Germany’s DAX (DAX) surged 5% while France’s CAC 40 (CAC40) added 4.5%.
Dow (INDU) futures increased 800 points, or 4%. Nasdaq (COMP) futures were up 4.5% and S&P 500 (SPX) futures gained 3.4%. The dollar has eased since Thursday, pulling back from its highest level in three years.”
Actually, in the case of the 2020 stimulus, there was simultaneous stimulus by the European Central Bank (ECB), the UK, the US, France, Spain, and Canada. Many other countries in the G20 soon followed suit.
And the US stimulus, which started as $1 trillion in early March, became nearly $3 trillion in combined stimulus as the stock market plunged, losing up to 30 percent of its value in the weeks leading up to the stimulus bill passage.
The injection also catalyzed gold’s setting of an all-time high by August of 2020, when it breached $2,000 an ounce for the first time. Then, as now, prior to the stimulus, the gold price was seen weakening until the stimulus was actually announced.
So it is highly likely that today is going to be a wild day to the upside, though there is a lot to indicate that markets are becoming incrementally less responsive to central banks’ ‘shock and awe’ tactics.
While mainstream financial commentators downplay the significance of the 10 year US Treasury rate breaking so sharply from the Fed’s current rate at 0.14, a continued widening of those figures signals rather definitively that more capital fabrication will not be enough to suppress yields.
These are precursor developments that are converging in the context of a hyperinflationary future. While the short-term spikes in the stock market and other fabricated assets like cryptos will yield some pretty impressive nominal gains, there is increasing evidence pointing to deteriorating confidence in central banks to keep the inflationary boogie man under wraps.
So get while the getting’s good. But don’t be surprised if the Black Swan of 2009 rounds the bend soon.
Commodities will benefit then while markets retreat.
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