The Fed put a lot of money into the banking system (monetary base). Banks, however, are keeping most of it (bank reserves) at the Fed because the Fed pays interest on reserves since October 2008 (click on the chart to enlarge).
All this money is available to the banks to lend in the future. This situation is very bullish for the market over the long term because it shows there is a lot of additional liquidity to be used to buy stocks.
"Do not fight the Fed" seems to be right one more time, one more liquidity cycle.
To find out more about my in depth view of the markets and my strategy just visit our website https://www.peterdag.com/ where you can review The Peter Dag Portfolio. You can also call me at 1-800-833-2782 to discuss your specific money management needs.
I will be happy to speak to your investment group on how the business cycle impacts investment strategies and the choice of asset classes.
George Dagnino, PhD
Editor, since 1977
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