U.S. stock prices are rallying again to a seven-week high. Why? The Federal Reserve.
These 5G stocks will be among the biggest winners (click here for details).
The Federal Reserve, America’s central bank, is taking extraordinary steps to backstop the U.S. economy.
The Federal Reserve has been loading up with large purchases of U.S. Treasury securities, mortgage securities, loans to small businesses, and corporate bonds and ETFs.
As a result, the Fed’s portfolio is estimated to grow to $8 trillion – $11 trillion.
That’s at least a 100% increase from last year. And it’s twice the size of the balance sheet during the 2007 – 2009 financial crisis.
The chairman of the Federal Reserve, Jerome Powell, says that these actions are required to save the U.S. economy.
“None of us has the luxury of choosing our challenges; fate and history provide them for us. Our job is to meet the tests we are presented,” said Powell.
Historically, the Federal Reserve has been focused on three priorities that include maximizing employment, stabilizing prices and moderating long-term interest rates.
Ever since the Great Recession, that mandate has expanded. It now includes supporting asset prices in the stock and bond market.
Stocks have roared higher since March 23.
This chart of the S&P 500 literally looks like the letter V. Right now, it appears that the market is expecting a swift and smooth recovery.
Yet this move is in direct contrast with the flood of negative news and a bleak outlook.
New unemployment claims have topped 26 million. That likely brings the U.S. unemployment rate to above 10% for the month of April.
Meanwhile, U.S. GDP is falling off a cliff.
Plus, U.S. companies are slashing dividends, reporting lower earnings, and withdrawing financial guidance for 2020.
The stock market is signaling “all clear.” Yet that’s in stark contrast from the reality on the ground.
Health and infectious disease experts indicate that this virus will be here for an extended period of time. They warn that re-opening the economy too soon presents dire health risks.
Additionally, they warn that we should prepare for a second wave of the outbreak heading into the fall and winter.
Meanwhile, the economy is being destroyed by nationwide shutdowns. A few states have begun lifting restrictions within the last two weeks. However, America’s “re-opening” doesn’t look anything like business as usual prior to the outbreak.
That’s why the Congressional Budget Office recently issued a dire report. The CBO expects that it will be years before the U.S. economy recovers from the downturn.
CBO estimates that unemployment will hit 16% in 2020. And even by the end of next year the unemployment rate will be at 9.5%.
Yet right now, the market is signaling better times ahead.
The current outbreak will reshape the world. It will change the way we work and learn. It will have a great impact on nearly every industry, sector and way of life.
There will be winners and losers on the other side of this crisis. And that’s why I’m focusing my research – and investments – on growth sectors for the recovery.
5G technology is one of the most promising new technologies. The next $2 trillion stimulus bill could help assure a nationwide rollout in 2020.
It’s sparking a new 5G Gold Rush – and I’m ready to bring you up to speed.
Yours in Health & Wealth,