By Gregory Mannarino
Just when it seems economic news can’t possibly get worse, well stocks go higher. The current market environment is completely and absolutely upside down.
Despite every single piece of dismal economic news thrown at it, well stocks go higher. How can that be?
The mechanism behind it is simple: the Federal Reserve, now the world’s central bank, is in total control of the market. Thus, the market believes the worse the economic news, the more support the world central bank will give to the markets – and the market is 100 percent right.
The Federal Reserve has back-stopped everything thrown at this market that generally would affect it in a negative way, and, moving forward, this will be the new norm. Moreover, there are several things in play right now that have the potential to push stocks much higher.
Understand first there is no connection whatsoever between our economy, for which there is no economy, as we are in a deliberately-induced deep freeze, and the current market, which seems to want to push higher.
Understand the Fed is buying all, and I mean all of the debt, while simultaneously funneling huge amounts of cash to Wall Street banks to buy stocks… this is a huge driver in today’s market environment.
Let us forget the stock market for a moment. Much of the recent price action of the stock market is being driven by action in the debt market, which, right now, is under total control by the Federal Reserve.
Even though we have a flat and partially inverted yield curve, generally a very ominous sign for the economy and market, again stocks are being pushed higher. So, we understand that the Fed’s indirect collusion with Wall Street banks, which own the Federal Reserve, is supporting this market in ways that have never been done before, and this relationship mechanism is very stock market positive.
What many do not realize is that crude oil is a main driver of both the energy and financial sectors of the market, and, despite the recent freefall in crude oil, again stocks are going higher. If they manage to prop up crude oil, stocks will respond positively in a big way.
But then there is the debt market. If there is one aspect of the debt market that should be followed by any market participant, it’s the 10-year yield. If they can manage to push the 10-year yield higher, while at the same time propping up crude oil, this has the potential to push stocks much higher.
And then we have coronavirus.
Any news regarding a possible vaccination or cure for the virus will be extremely stock market positive, so, true or not, expect some type of jawboning regarding a positive treatment for coronavirus to be floated out by the president and mainstream media.
Clearly, it’s a rigged game. Get used to it.
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By Gregory Mannarino