More Stimulus = Rising Stocks

The market just finished one of their best months in its history, with the S&P 500 up north of +10%, as we rallied back nearly two-thirds of our February and March drop. The reaction of many to this meteoric rise in the markets is disbelief. This is justifiable considering the awful and uncertain situation the US and World Economies are currently in.

The US Federal Reserve, along with all other countries’ central banks, is flooding the system with currency right now. As in most previous examples of this “quantitative easing”, a good chunk of the new money will find its way into the stock market and prices will be inflated. With bond yields in the low single digits, there is just no other place to put your liquid investment dollars. Stocks will benefit from being the nicest house on a terrible block that all of humanity has to invest within confines of.

That said the market is due for some consolidation after such a good run in April. A step back is warranted and should be expected. The questions is whether this is a step back or a whole other leg down.

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