The Stock Market Is Surging to Record Highs & the Fed Will Do Anything to Keep It There

  • The Fed hasn’t ruled out negative interest rates.
  • If it wants the stock market rally to continue, the central bank will probably have to resort to below-zero rates.
  • Without more Fed action, the U.S. economy probably can’t pull off a V-shaped recovery.

The U.S. stock market is trading remarkably close to all-time highs. Investors have remained bullish on the nation’s long-term prospects despite worrying economic data.

Much of that optimism has been fueled by the Federal Reserve, whose ever-expanding balance sheet has provided a formidable backstop for financial markets.

The stock market’s pandemic recovery has been impressive. | Source: Yahoo Finance

Although the stock market’s epic recovery suggests the U.S. is heading for a V-shaped recovery, the central bank is preparing for a worst-case scenario.

Fed Economist Argues for Negative Rates

Yi Wen, an economist for the St. Louis Fed, says despite Jerome Powell’s reluctance, the bank will have to consider negative interest rates.

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