Does the Fed Have Any Credibility Left?

The Federal Reserve has demonstrated that it is incapable of weaning the stock market off Fed-stimulus. This begs the question of whether the central bank has any credibility left as an inflation fighter and independent institution.

The central bank began “treating” the market years ago. The Federal Reserve began with an initial round of QE, and when that didn’t work, it proceeded to provide additional injections in the form of QE2 and later QE3. Even that wasn’t enough, and the Fed was also forced to throw in a little twist here and a little twist there.

Markets were under the impression that all would be well, and eventually, the need for these monetary injections would dissipate.

All appeared to be going as planned for a while until in 2016 the markets regressed on the idea of an end to the era of easy money. That regression didn’t last long, however, and the markets received another round of “stimulus” in the form of major tax cuts. These tax cuts would seemingly provide the markets with enough of a tailwind to keep marching higher, even as the Fed looked to wean them off central bank-induced highs.

Fed Chief Jerome Powell recently alluded to the Fed’s balance sheet contraction running on “auto-pilot” an all seemed well, for a while anyway. Then Powell suggested that rates may have a way to go before entering neutral territory, and markets did not react well. As recently as a month ago, the Fed was staying the course, with further rate hikes planned for 2019.

The Federal Reserve was singing a very different tune just last week, however, at the conclusion of its latest policy meeting. Not only is the Fed now unlikely to hike further, but it is also putting a halt to its QT program. If that’s not enough of a U-turn, the Fed even alluded to the potential for lowering rates again.

The Fed has acknowledged what many have known for some time: The stock market cannot continue without stimulus. For now, the artificial rally may continue, but in the end, there will be a price to pay and it will be ugly.

The Federal Reserve has turned the markets into the ultimate house of cards, and that house of cards will eventually come crashing down again. It is not a question of “if,” but rather “when.”

The market’s inability to function without help from the Fed should be extremely alarming to investors, making right now the ideal time to diversify with alternative asset classes. The potential for a market explosion, recession, further QE and a weaker dollar scream “buy gold now.”

The next major bull market in gold has already begun, but it’s not too late. Adding this key asset class to your portfolio has never been easier, and perhaps never more important, than now.

Speak with an Advantage Gold account executive today about the potential benefits of gold ownership and to learn how this asset may play a key role going forward. Our associates are here to answer any questions you may have and can even show you how easy it is to build a significant allocation in gold using your IRA account.

Don’t wait for the next major market meltdown or for the next round of Fed easing to destroy the dollar. Explore your options for gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started now.

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