Fed and hall of mirrors

Investment ideas based on interaction between Fed and markets

According to economic theory, monetary policy is the key driver of asset price changes. Monetary expansion results in a decrease of the bond market’s rates.  Capital raising costs drop, profitability grows. Positive corporate reports raise stock quotes. On the contrary, monetary restriction worsens companies’ financial results because of higher borrowing costs. In the real world, it often happens that it’s Fed that follows stock indexes and not the contrary. In 2004, former Fed Chair Ben Bernanke called the interaction between S&P 500 and the Central bank “hall of mirrors”.

Should prisoners…<br /><p>Read full author’s opinion and review in blog of #LiteForex</p>