fter two consecutive weeks of declines in the Fed's balance sheet, the stock market has started to look especially wobbly, and after several days of steep declines, all June gains have vaporized.
Of course correlation isn't causation, and the prevailing narrative is that the market weakness has been due to a spike in coronavirus cases across sunbelt states and fears that the V-shaped recovery is not coming, although as we have repeatedly said, the Fed will urgently need to expand its QE which is now running at "only" $80BN per month for TSYs, an amount that will be insufficient to monetize the flood of new debt in the coming years. To do that, however, the Fed needs a "shock" pretext to resume aggressive balance sheet expansion and a "second wave" is just that.
So while we wait for the media narrative to "confirm" that the next escalation in the pandemic has arrived and is forcing states to resume shutdowns, it is hardly a surprise that on Wall Street strategists are taking a step back and after bearish projections virtually disappeared in the past month, discussions of a bear market rally are once again front and center with BofA's Michael Hartnett taking the lead. According to the BofA CIO, while Q2 is on pace to be the best quarter for the S&P500 and oil in 50 years...
http://www.zerohedge.com/markets/greatest-bear-market-rallies-all-time-and-why-one-ending?utm_source=feedburner&ut
Realist - Everybody in America is soft, and hates conflict. The cure for this, both in politics and social life, is the same -- hardihood. Give them raw truth.
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