ECB QE Doing Opposite of Objective

Jon Banking, Economy, Fiscal Policies, Government, Market Commentary

I like to say that there are only 2 fundamental factors which matter for the overall stock market:
How much money is there? How much does that money want to be invested? Change either of those, and the market will move up or down. But 2016 is showing us a perverse version of that. We are in opposite-world now.
The Fed has backed away from the QE game and is wishing it could find a sufficient excuse to start normalizing interest rates. But the rest of the world is heading into the world of negative interest rates, such that banks are contemplating expanding their vaults to hold cash in lieu of holding negative-yielding government and corporate bonds. The idea is that pumping all of that extra money into the banking system should help lift the financial markets, and thus the actual economies of the countries involved.

This post was published at FinancialSense on 06/09/2016.