FOMC, World Bank and stock markets

The US stock market in the technology sector (Nasdaq) this week showed a new historic high. The more traditional and wider SP500 index reached the marks where the year began. Just like there was no lockdown and pandemic, economic halt and 42 million unemployed, there were no mass bankruptcies of companies with 100 or even 200 years of history (thousands of large stores are planned to be closed in the near future), etc.

The reason for this madness is not only human greed and stupidity, but also the actions of the Central Banks, including the Fed, which flooded the markets with cheap money. If you believe the story (Japan of the 80s of the last century) and the old expression “I gave birth to you, I will kill you”, the giant bubble in the US stock market which started with the FED should collapse also after the actions of the Central Bank.

That is why every FOMC meeting is important both tactically and strategically. However, markets do not expect much from today. Powell made it clear enough that the Fed is not going to switch to negative rates. As for the expansion of the quantitative easing program, following the example of the ECB (it increased the program last week by 600 billion euros, i.e. almost 2 times), Powell prefers to transfer the initiative to the Government so that they solve problems with fiscal instruments, rather than monetary ones.
What will happen today? The Fed is likely to announce updated forecasts for the US economy, and may also clarify its plan of action in the context of monetary policy.

In the United States, protests continue, the consequences of which are beginning to take on an openly idiotic-populist form, which ultimately will not do well: all these ostentatious kneeling or attempts to dissolve the police as such will ultimately result in a sharp increase in crime against the backdrop of general impunity.

In fact, the current situation in the United States continues to look like an ultra-combo for the collapse of the price bubble: the strongest economic crisis and its consequences in the form of massive bankruptcies and unemployment, multiplied by mass protests in the country and the domestic political crisis. The whole question is in the last straw that will break the ridge of this crazy bull who is now hosting Wall Street. So, we keep on recommending to sell in the US stock market.

And finally. The World Bank recently announced its vision of the global economy in 2020. And the vision is very gloomy. The world economy will shrink by 5.2 percent, which will be the deepest recession since 1945-1946. Moreover, it will be more than twice as deep as the economic downturn associated with the global financial crisis.