The reliance on the Federal Reserve to bail out Wall Street and by association other stock markets around the world just shows how addicted to cheap money markets have become.
Printing money to buy bonds may stop interest rates on government debt from going through the roof for a while, but it does not put money into many household bank accounts. It also will not encourage people to borrow and spend because those that have been doing this are already at the limit of their borrowing capacity, or have no income to take on any more debt.
On most measures, the valuations of good businesses are very expensive and look unsustainable as their profits fall throughout the year.
Sadly, I feel that the hope for a “V” shaped recovery is a case of very wishful thinking. Unless we get a vaccine for the coronavirus quickly then social distancing measures are going to continue. This means that the business models of many consumer facing businesses are in big trouble as they are not going to be able to serve enough customers to make any meaningful profits. This will then feed into weak demand in their supply chains and won’t trigger the recovery that people hope for.Download PDF