How the Fed is driving savers to riskier investments
The Federal Reserve is getting lots of love from the financial markets because its lowered the short-term rates that it controls to just about zero, and has figured out inventive ways to drive long-term rates to ultralow levels and get some formerly troubled parts of the financial system working smoothly again.
The stock market has risen sharply in the past three months, in large part because of the Fed, with the S&P 500 erasing most of the terrifying 34 percent, five-week drop that it suffered from its mid-February all-time high to its March 23 low.
And even though retail sales are still well below where they were before the pandemic struck and the unemployment rate is much higher, theyre are a lot better than they were not long ago, in large part because of the stimulus created by ultralow interest rates and various pieces of bailout legislation.
But despite the benefits that our economy and stock market have gotten from the Fed, Ive got a problem with the Were not even thinking about thinking about raising rates [for the next few years] policy of Fed Chair Jerome H. Powell.
https://www.washingtonpost.com/business/2020/06/30/stocks-interest-rate-fed/
I'm getting nervous about what the next year portends, too. I'm in a capital preservation mode these days and moving money out of stocks and into bonds, because I'm very concerned of the effects of lower tax revenues -- despite what my advisor is telling me (that it looks like gradual economic improvement for the time being).