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$586 Billion In Five Business Days: Fed’s Balance Sheet Balloons To $5.25 Trillion

Unlimited Fed buying versus a deadly, highly contagious respiratory infection. Pick a winner.

The bear market for the Dow is over – technically.

You’re likely to see any number of headlines to that effect. Hopefully, all of the accompanying stories will be dripping with sarcasm.

It’s true that the Dow staged its biggest three-day advance (some 21%) since 1931 through Thursday, but no serious market observer would suggest we’re no longer in trouble, let alone totally out of the woods. Indeed, the narrative right now is that US equities will almost surely revisit local lows before making a final bottom, on the way to eventually rebounding in earnest as the virus runs its course in the US.

One of the many amusing aspects of the COVID-19 bear market is the extent to which it shattered the assumption that nothing could stop equities’ inexorable rise, the final leg of which many (correctly) attributed to the Fed’s opening of the liquidity spigots in the wake of September’s repo squeeze.

As it turns out, that steady “morphine” drip of liquidity (for “reserve management” purposes) proved wholly insufficient in the face of an existential threat to the global economy in the form of a pandemic that has now shuttered the services sector across much of the western world after rampaging through China in January and February.

Now, though, the Fed is back in game in earnest with “real” QE, and in unlimited quantities. The Fed’s balance sheet had, of course, already gone “vertical” again (see the red line in the visual).

But, as of the latest read, the Fed’s mountain of assets has grown to $5.254 trillion.

Although this isn’t really “surprising” given the Fed came into this week having completed around half of the $700 billion in new purchases announced on March 15, and considering the fact that Monday brought the announcement of open-ended QE (along with a raft of other measures including a corporate bond buying program), it’s still worth pointing out that the Fed’s balance sheet has grown $586 billion over just five business days.

So, when it comes to asset prices, the matchup is: Unlimited Fed buying versus a deadly, highly contagious respiratory infection.

Pick a winner.


5 comments on “$586 Billion In Five Business Days: Fed’s Balance Sheet Balloons To $5.25 Trillion

  1. Covid-19 might move more slowly than the Fed buys stuff, or maybe not. But the virus will make no announcements regarding its timing of symptoms appearance in people, its pathway through the country, or its means of morphing into the next strain.

  2. And here’s the truly scary thing: It’s not enough.

  3. This will be interesting. Reflating the bubble without a pressure regulator, and a duct tape and bailing wire back-flow valve. Oil is still up in the air or sustained, and a re-balance on tap. The only consistency to be found is within a irrationality of the president. We could have gone to school on the virus before it went to school on us; advantage blown like DC and 2 trillion dollars.


    • Oh and a Record setting 5.0 earthquake in frac central Orla Permian Basin Tx where they flare without care in the nascent armpit on the range.

  4. FYI: Japan & deflation

    ] Overall, Japan’s stimulus packages added up to over one hundred trillion yen, and yet they failed. According to these economic schools, that stimulus money actually perpetuated the problem it was intended to cure.

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