Honestly, you might think it’s impossible . . . The United States Federal Reserve buying American stocks.
Yet I wouldn’t be surprised to see this happen – if stocks drop again.
Because Fed Chairman Jerome Powell says the Federal Reserve plans to backstop the entire U.S. economy. Everyone will be 100% whole – even if that means taking drastic measures to shore up the financial markets.
Stocks are already surging with the Fed’s blatant support. And that’s helping assure . . .
In fact, this unique situation is sparking massive gains of 1,037% or more in just 60 days.
Powell hasn’t said that he plans to buy up stocks. Yet he’s already taken some unusual steps.
For example, the Federal Reserve started buying up junk bonds last month.
Normally the government would ONLY buy “investment grade bonds.” Yet due to the current crisis, the Federal Reserve has also agreed to buy low-grade, high-risk corporate bonds.
Companies like Ford (NYSE: F), Kraft Heinz (NYSE: KHC) and Occidental Petroleum (NYSE: OXY) have had their debt downgraded to junk. And the Federal Reserve says it is willing to buy this type of debt.
That’s just the start . . .
The Fed also started investing in junk bond ETFs.
Investment manager Blackrock just received $75 billion from the Treasury. The firm will take that capital and leverage it 10-to-1.
That means Blackrock will potentially invest $750 billion in ETFs in the coming months.
Why would the Federal Reserve buy junk bond ETFs?
Simply because it wants to support the price of these bonds in the market. If the prices fall to low, the Fed will swoop in and aggressively buy.
These moves show just how far the Fed will go to support asset price. It shows that the Fed is willing to bail out both good companies – and those with shaky businesses that have taken on too much debt.
The Fed is buying just about everything. And if stocks fall again, we could see America’s bank stepping up to buy common stocks and ETFs.
The bottom line is that the Federal Reserve has a new mandate:
Support asset prices.
With the Fed backstopping the market – it’s impossible for stocks or bonds to drop very much.
Remember that the trend is your friend. And right now, the trend is UP, UP, UP.
Yours in Health & Wealth,