After many months of speculation, investors last week learned without much room for doubt that the longest and most profitable bull market support in Wall Street history will soon change, however this turn could be transitory or done in such a way that the existing scenario for this twelve-year bullish movement remains valid, but in a less aggressive version of the ultra-dovish mentality on the part of the largest central bank in the world. This is at least the expectation of investors who, for the time being, do not anticipate a future where interest rates rise above 2%, nor that the Fed will reduce its balance sheet to pre-2008 financial crisis levels, when it was below $1 trillion.
Indeed, today the market’s dependence on monetary stimuli is a problem of unknown resolution, in addition to the several trillions injected by the US government in the various aid packages to the world’s largest economy, with a view to its recovery after the shock caused by the measures to contain the COVID pandemic, as well as the new multi-year package proposed by Joe Biden for the strengthening of semiconductor production capacity in the US, for the improvement of the country’s infrastructure, as well as for the social component, in key topic in sustained competitiveness of any economy. In other words, something will change, but it is still uncertain what will change and how it will change, which in the short-medium term could mean a few months of increased volatility while the roadmap of the FED’s action is not clarified.
