- Financial markets are very dependent on Central Bank activity.
- The FED is slowly tightening, but the activity is more a façade than actual tightening. Europe is still easing.
- The fact is that things will eventually change. When? Nobody knows. The only thing a savvy investor can do is protect themselves and take advantage of everything.
Many don’t see that the current market is highly influenced by Central Banks.
In the past 8 years, Central Banks have been continually putting money into the system. The FED has recently stopped doing so, but the ECB is still buying bonds, even corporate bonds, while the Bank of Japan has bought almost everything they can buy. So, it’s clear that high current asset prices are a direct result of Central Bank actions as the fundamentals haven’t really improved as much as asset prices have increased.
The long-term picture is relatively easy to understand, but I must say, I was surprised by the short-term correlations between Central Bank activity and stock prices. More →