The Federal Reserve is expected to lower its target Fed Funds rate twice by the end of the year as traditional markets price in a bizarre Tale of Two Cities. Or in this case, economies. By most accounts the US economy is fine. Our cheap money addiction stands in contrast to global imbalances but given virtually free money asset managers do the most logical thing: buy stocks, bonds, gold, real estate. But mainly stocks & real estate as the whole idea is to get investors to reach for yield & risk. Do not put your cash under your mattress, central bankers are admonishing.
Then there’s Europe & Japan – hopelessly trapped by negative yields, declining birth rates, fear, excessive government regulation & a refusal to embrace new enterprise.
The free-money, negative interest-rate boondoggle might be the most insane, least practical economic endeavors in mankind but however you’re scoring it at home it’s picking up pace & they’re doubling down on its madness.
Bonds see Lehman Part II as stocks & real estate see Goldilocks – steady growth & low inflation. It’s almost certain you cannot have your cake & eat it too, history shows.
Remember in the fall of 2007, stocks posted all-time highs – a year before bedlam, pandemonium, outrage and terror befell every single market the world over.