That’s because if you believe in the fundamental case that positive or near-positive real rates are going to cause the gears of the economy to grind to a halt once people’s credit lines are tapped and personal savings have evaporated, it won’t matter whether the federal funds rate is 2.5% or 5%.
This behavioral signal doesn’t tangibly improve people’s current financial situation, but it gives them hope - hope that if they can make one more month of bills or fake one more quarter of investment marks, relief will eventually come down the pipe, and our economic Ponzi scheme will implode in an orderly fashion, as opposed to a chaotic fashion.
To be honest, over the last six months or so, I haven’t really even wasted too much brainpower thinking about the overall market, instead focusing on individual names and ETFs that I think could benefit from industry, political, geopolitical, and some macroeconomic trends.
I was thinking today about my prognostications over the last year regarding the stock market, and the old phrase “a watched pot never boils” came to mind.
A Watched Market Crash Pot Never Boils The stock market will crash as a result of policy the last few years.
Putting that aside, one tailwind the market has had behind it has been psychological—the expectation of cutting rates in a timely and systemic fashion.
https://quoththeraven.substack.com/p/a-watched-market-crash-pot-never
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