Don't Fall for the 'Cash on the Sidelines' Trope
Money coursing through the economy can impact markets and investor sentiment for the better, just not in the way many think.
Bull markets are often misunderstood.
Photographer: Andrew Harrer/Bloomberg
I find myself bothered these days by the quality of both bullish and bearish market arguments. The most prominent is the meaning of “all that excess capital” that has been created by the Federal Reserve and U.S. government that is waiting to be deployed, with “massively bullish implications.”
This notion stems from actions by the Federal Reserve, which has no plans in the foreseeable future to raise its benchmark interest rate from near zero last year or stop pumping $120 billion into the financial markets each month through its quantitative easing measures, as well as the trillions of dollars in fiscal relief measures last April and December and again last month. Now comes the Biden administration’s proposed $2.25 trillion American Jobs Plan that focuses on infrastructure.