I still remember when the market held its breath before the EDF meetings, the sentiment varying substantially depending on the size of the suitcase Alan Greenspan took to the meetings, namely if it was apparently full it was a sign that there would be changes in monetary policy, in case otherwise the expectations were for a continuation of the course by the EDF. It was the time when central bank dominated the direction of the markets, that is, the indices and investor sentiment navigated according to the decisions related to monetary policy and the central bank was much more immune to market developments, as well as to the Government, paradigm that with the 2008 crisis it began to be drastically changed to scenario that we currently have, where the FED is hostage to political interests of the Government, as well as to the vagaries of the market, as it was perfectly clairvoyant in 2018, when the US central bank American government embarked on a more aggressive path of normalizing monetary policy, with an emphasis on reducing its balance sheet.
Incidentally, it is very relevant that Wall Street corrected twice in 2018, once at the beginning of the year, when the FED balance sheet began to decline more significantly, and more severely in October, when the central bank announced the continuation of the reduction, the balance had already been reduced by almost $500 billion. And I say relevant because interest rates had already started to rise two years before, from 0% to 2%, and until then the market has not suffered since the S&P500 reached a historic high on 26 January 2018, regardless of the escalating cost of the money. That is why, at this stage and with the prospect of an initial stimulus package in the order of $1.5 trillion, the market noise already contains an anticipation of a possible change in the FED’s ultra-dovish mentality, a scenario that Jerome Powell and others members have repeatedly tried to put off topic, however it is a topic that will certainly go to the top of the noise, once the Economy begins to give the first signs of gaining enough moment to spite inflation, being left to know how the Fed will react this time, taking into account that in 2018 it ended up giving in to the very negative reaction of the market, ending with the reduction of the balance sheet at the end of August 2019, well before the COVID crisis.