Central Banks Out of “Tools” What is Next?

Central Banks Out of “Tools” What is Next?

Central Banks Out of “Tools” What is Next?


On Wall Street and Main Street there is a growing consensus among participants that the world’s central banks have run out of tools.

They certainly seem to have used up all of their monetary tools in an effort to revive economic growth and avert deflation. Yet the results have been very disappointing.

The ECB doubled down in March by pushing lending rates further into negative territory and expanding its QE program to include purchasing corporate bonds, this June.

It is noteworthy that the latest industrial production data for Germany, France, and Italy is still weak despite the ECB’s ultra-easy monetary policy.

The BOJ shocked markets with its negative interest-rate policy (NIRP) at the end of January. The 14-15 March mins of the BOJ’s policy committee indicated that several members are not happy with NIRP. As Japan’s economy remains stuck in economic stagnation and borderline deflation.

At the end of Y 2015, after raising the federal funds rate by 25 bpts, US Fed officials said it expected to be hiking this rate 4X this year. They have not done so and may not for the rest of this year, the chatter is 2X, but we wait to see.

While the central banks have used lots of things, they have not yet tried dropping money from helicopters.

The big names in the financial world, including JPMorgan (NYSE:JPM) CEO Jamie Dimon and hedge fund billionaire Carl Icahn, believe that the US government needs to spend more money.

Carl Icahn, a close adviser to Donald Trump, noted in a TV interview last month that it is unlikely that much will happen on the spending front anytime soon.

He said Congress was “grid-locked obsessed with this deficit to a point that I think it’s almost pathological.” We will not be surprised if he and other Giants of Finance embrace and promote the idea of helicopter money.

Wednesday, the US major stock market indexes finished at: DJIA -217.23 at 17711.12, NAS Comp -49.19 at 4760.69, S&P 500-19.93 at 2064.46

Volume: Trade was above average with about 922-M/shares exchanged on the NYSE

  • NAS Comp -4.9% YTD
  • Russell 2000 -1.9% YTD
  • S&P 500 +1.0% YTD
  • DJIA +1.6% YTD
HeffX-LTN Analysis for DIA:  Overall Short Intermediate Long
Neutral (0.08) Neutral (-0.17) Neutral (0.08) Bullish (0.33)
HeffX-LTN Analysis for SPY:  Overall Short Intermediate Long
Neutral (0.20) Neutral (-0.16) Bullish (0.38) Bullish (0.39)
HeffX-LTN Analysis for QQQ:  Overall Short Intermediate Long
Neutral (-0.13) Neutral (-0.21) Neutral (-0.15) Neutral (-0.03)
HeffX-LTN Analysis for VXX:  Overall Short Intermediate Long
Bearish (-0.43) Neutral (-0.23) Very Bearish (-0.56) Very Bearish (-0.50)

Stay tuned…

Paul Ebeling


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