~ Janet Yellen (The Federal Reserve) says purchases of stocks and corporate bonds can help in a downturn ~
Is Federal Reserve Chair Janet Yellen bullish on the stock market? I wouldn't say so, but, the Federal Reserve definitely does see possible opportunities in the stock market, other equities and corporate bonds.
Federal Reserve chair Janet Yellen spoke via video conference yesterday (9.29.16.) at a minority bankers meeting in Kansas City. Discussion of an asset purchase stimulus program was on the agenda of this meeting and on this topic Yellen stated -
"If we found, I think as other countries did, that they could reach the limits in terms of purchasing safe assets like longer-term government bonds, it could be useful to be able to intervene directly in assets where the prices have a more direct link to spending decisions." - (quote source: Reuters)
Yellen also expressed that purchasing equities and corporate bonds could have cost benefits for the Federal Reserve.
If we think about the current global climate of finance and banking it is not odd that the Federal Reserve would be exploring the idea of purchasing assets other than longer term gov't bonds. I also believe Yellen is saying that in a financial climate where it no longer makes sense to solely purchase longer term gov't bonds - there may be greater opportunity and ROI-improvement in purchasing stocks, other equities & corporate bonds for the Federal Reverse. Stocks, other equities and shorter term corporate bonds also tend to be 'more liquid' than longer term gov't bonds and the Federal Reserve seems to be valuing 'control over assets' via liquidity.
Will this outlook from Janet Yellen and the Federal Reserve effect U.S. interest rates in the long term? It all really will depend on if the Federal Reserve maintains this outlook on longer term gov't bonds. If the stock market, corporate bonds and other equities continue to look attractive to the Federal Reserve and purchasing longer term gov't bonds continues the trend of being 'exhausted' for the Federal Reserve - the Federal Reserve may keep interest rates low and 'attractive' and make acquisitions in the stock market, corporate bonds and other equities.
Until next time,
- Ford Mogul
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