Monetary Stimulus

Monetary policy is the mechanism through which the supply of money is controlled by monetary authorities. Monetary stimulus is the attempt by the monetary authority to manipulate money supply and generate growth. This can come in the form of lower interest rates, as well by lowering the reserve ration. The reserve ratio is the amount of assets that banks need to have on deposit with a central bank.


The stock market has an underlying strength to it, seemingly only to be undone by geopolitical events. Fed action always has the potential to shock the system. Negative economic news isn’t fazing this market. On the back of a pretty…

The monetary environment is still highly favorable to stocks and should continue to be so well into 2015. However, while this market can handle higher interest rates, stocks can only advance in a higher interest rate environment if gross domestic…

Good numbers are one thing, but stocks did go up in advance of what’s turning out to be a fairly decent earnings season. It’s not unreasonable at all to expect the market to take a solid break, perhaps for the…

The resilience the stock market continues to have is a reflection of what continues to be extreme monetary stimulus. And while the stock market is a leading indicator and a bet on a future stream of earnings and economic activity,…

Being financial reporting season, it’s important to discern between results that beat Wall Street consensus and real economic growth. Abbott Laboratories (ABT) just announced better-than-expected first-quarter earnings, but they weren’t better than the comparable quarter of 2013. Operating earnings, earnings…

Trading action in stocks has been all over the map so far this year, while investor sentiment remained generally positive. The fact that there was a bunch of profit-taking after the solid recovery in February and March is neither a…

The significant price reversal in biotechnology stocks is very meaningful and appropriate, considering the massive capital appreciation the sector provided over the last three years. There’s a reset going on with stocks, even with the Fed still onside. Earnings are…

There are so many esoteric good businesses out there, but very few attractive investment opportunities for new money right now. In equities, I search for consistency from a company—consistency of corporate operating performance, diligent management in good times and bad,…

There is going to be considerable pressure on interest rates and the Federal Reserve very soon, and it’s very likely that we’re going to get some choppy trading action in stocks. The reason for this is, of course, positive economic…

With the stock market at an all-time high on mediocre growth, I keep trying to remind myself that equity prices are a leading indicator as investors bet on future corporate earnings. Recently, I revisited J. Anthony Boeckh’s book The Great…

Geopolitical events are overtaking the stock market’s near-term trading action, which was all about speculation over the Federal Reserve and what Chairman Ben Bernanke will do regarding quantitative easing. Based on what transpires in Syria, the equity market is ripe…

The second-quarter earnings season is considered over, but there are still a number of companies reporting. And the same trend continues—the numbers are anemic. Making the case for a rising stock market in the face of little sales growth and…

A stock market strategist who I trust and respect is advocating that investors take some money off the table and book profits from U.S. equities. His view is that, with declining earnings expectations for the bottom half of the year…

This is a big week for capital markets, with the Federal Reserve meeting and July’s unemployment numbers to be released on Friday. One thing that’s been clear with the stock market is that it has been staying lofty, mostly due…

If there is going to be genuine economic growth in mature economies, the leadership will have to come from the U.S. economy. The convulsions taking place in the Japanese capital markets are emblematic of the monetary exuberance that both captivates…