MarketWatch quoting DataTrek’s Nick Colas:
…. “Nicholas Colas, co-founder of investment research shop DataTrek Research, also had some thoughts on the link between the real economy and markets, in an analysis released Friday. “The issuance of money sits at the intersection of public trust and government responsibility,” Colas wrote.
“It is tempting to think that the Fed’s actions today means US stock prices will only trend higher from here: When you remove near term bankruptcy risk from every publicly held company regardless of credit rating or near-term financial condition, asset prices should rise,” Colas added. “Markets know that no matter how bad cash flow might be there is a Fed loan backstop waiting in the wings if needed.”
What’s more, he said, “The Fed knows it must keep equity markets stable to rising in order to keep the 40% of Americans who own stocks sufficiently liquid and confident to spark a recovery in consumer spending. This is the classic wealth effect, something the Federal Reserve understands well”….
Read the full article here on MarketWatch!