You didn’t miss much between Friday’s afternoon buying spree and this morning. In times of trouble, the market looks to the Federal Reserve to come to the rescue, to fix all the problems, to exercise its infamous put.
It’s like they’re the Super Friends or something.
The jobs report was so bad that the stock market’s convinced the Fed’s going to do something at tomorrow’s FOMC meeting. It is now obvious to just about everybody that the recovery phase of the recovery is over, and there was less recovery than lingering problems. Uncle Sam didn’t fix enough things for all the money he blew through, and now it’s time for, well, something.
The stock market is pricing in action; that’s what Friday’s late rally was about, and that’s what today’s gains are about, here and abroad. The market does this from time to time; by piling so many bets on one number on that roulette table, the markets are trying to force the Fed into doing their bidding, by setting up a very ugly sell-off should the central bank assets its independence.
If the Fed doesn’t do anything, if they issue one of their famous one-the-one-hand, on-the-other-hand statements but don’t implement some new program, I think the stock market will take that very badly. If, on the other hand, they do start some new asset-buying program, “QE Light,” I’ve heard it called, you may get a rally tomorrow.
The problem, of course, is how long it can last, because when the Fed’s actions can reasonably be described as a Hail Mary pass, well, that’s a pretty bad sign right there.