Wednesday Musings 12-16-2020

On this day in history The Sons of Liberty threw 19 million cups of tea in 342 containers, valued at $1,000,000 today, into Boston Harbor 247 years ago - This incident is also known as The Boston Tea Party

This past week the Markets (S&P500) were up just under 1% and are now up over 14% for the year. After much deliberation it seems another sizable stimulus package from congress will be coming in the next few days.

Below is a chart of the Federal Reserve Balance Sheet. In the aftermath of the financial crisis the Federal Reserve started buying US government debt to lower interest rates further. In the COVID crisis this program accelerated and today the Fed announced it would continue to buy 120 Billon of bonds per month until employment returned to pre-pandemic levels. Why does this matter? It's very bullish for stocks, as interest rates stay low making stocks more attractive investments, and also freeing up capital from large banks to buy more risk assets. This has led to large amounts of optimism for stocks over the next 12 months.