Happy Holidays from ETF Action! We hope everyone is enjoying themselves, and to provide a little bit of entertainment, the following is an edited version of “How the Grinch Stole Christmas” by Dr. Seuss.
How Fed Chair Powell Stole the Bull Market by ETF Action
(credit to Dr. Suess, How the Grinch Stole Christmas)
Every investor on Wall Street liked the Bull Market a lot…But the Fed, who lived down in DC, did NOT!
The Fed Chair hated bull markets! The whole Bull Market season! Now, please don’t ask why. No one quite knows the reason. It could be bull markets give him nothing to do. It could be, perhaps, that easy money made him blue.
But I think that the most likely reason of all, May have been the President’s tweets got his back against a wall. Whatever the reason, whether boredom or tweets, He stood there on FOMC Eve, hating Bull Market treats.
Staring out from his office with his sour, Fed Powell frown, At all the green numbers that wouldn’t go down. For he knew every investor was investing with glee,Was busy now, reinvesting their gains on a stock spending spree.
“And they’re making money!” he snarled with a sneer, “Tomorrow is FOMC day! It’s practically here!” Then he growled, with his fingers nervously drumming, “I MUST find some way to stop this market from humming!”
For tomorrow, he knew, all the Wall Street gals and guys, Would wake bright and early. They’d rush to make more buys! And then! Oh, the noise! Oh, the noise of buying! Buy! Buy! Buy!
That’s one thing he hated! The BUYERS! BUY! BUY! BUY!
Then the brokers, young and old, would sit down to trade. And they’d trade! And they’d trade! And they’d trade! TRADE! TRADE! TRADE!
They would trade stocks, and high yielding bonds too. Which was something the Fed Chair couldn’t stand them to do!
And then they’d do something he liked least of all! Every investor, the tall and the small, Would stand close together, with market bells ringing. They’d stand hand-in-hand. And the markets would keep singing! It’d sing! And It’d sing! And It’d SING! SING! SING! SING!
And the more the Fed Chair thought of this bull market roaring, The more the Fed Chair thought, “I must stop this from soaring!” “Why, for ten bull years I’ve put up with it now!” “I MUST stop this bull market from continuing! But HOW?” Then he got an idea! An awful idea! THE FED CHAIR GOT A WONDERFUL, AWFUL IDEA!
“I know just what to do!” The Fed Chair laughed on his own. And he decided to raise rates and deliver a hawkish tone. And he chuckled, and clucked, “What a great Fed Chair scare!” “With this pen and dot plot chart, I look just like a bear!”
“All I need is a reason…” The Fed Chair looked around. But, since reasons are scarce, there was none to be found. Did that stop the old Fed Chair? No! The Fed Chair simply said,”If I can’t find a reason, I’ll make one instead!”
So he called his Fed Banks. Then he spoke of inflation, And explained the excesses in market expectations. Then he filled out his charts ready to levy the bill, With briefcase in hand, he made his way to the Hill.
Then “off to congress!” they heard the Fed Chair call. Where representatives and senators fought over a wall. All their offices buzzed. Staff members running scared. All the congress men and women too busy to care.
When he came to his podium with news for all to hear.”Fed rate is going up, the fourth increase this year,” And he talked of inflation, GDP growth numbers clinched in his fist. “The money supply is tightening!” The Fed Chair hissed.
He stuttered only once, for a moment or two. Then he discussed markets and said, “I will give them the flu.” When the market participants started to sell all in a row. “These gains,” he grinned, “are the first things to go!”
Then he slithered and slunk, with a smile of disdain, Around the whole stock market, he took every gain! Stocks! Bonds! Alternatives! And Commodities! Staples! Materials! Energy! And Utilities! “I’ll make this green turn red,” said the Fed Chair.As he took all the gains and turned the bull into a bear!
Then he slunk to the bond market where he inverted the yield! He took investment grade! He took high yield! He punished duration as markets started to crash. Why, he even took hedges as investors piled into cash!
Then he fed all the gains to the bear with glee. And he spoke of the future with a hawkish decree. And the Fed grabbed the hawk, and it made a hoarse screech, The market continued to fall as support levels were breached.
Then he looked to his phone and a new tweet preached. It was President Trump who has millions of readers. The Fed had been caught by this eccentric world leader, Who often speaks of the markets with flourish and theater.
President Trump said to the Fed Chair “Why must you turn this market into a bear?” But, you know, that old Chair was so smart and so slick, He thought up a reason, and he thought it up quick! The Fed chair explained, “unemployment is low,” “The Economy is strong, and wages continue to grow.” “I’ll go back to my office where I’ll wait and see, And monitor the facts, the data is key.”
But Trump behaved like a child while he continued to tweet “This Fed is wrong,” he wrote, “ask anyone you meet.”
But the damage was done, The markets were stunned. Despite consumer spending and unemployment low, The Market can only see the bad news that it knows. The Fed Chair went back to his office late in December. It’s been the worst month investors can remember.
“PoohPooh to the Markets!” The Fed Chair was humming. “They’re finding out now that the Bear Market is coming! The market’s just waking up, I’ll know just what they’ll do, Their mouths will hang open a minute or two, Then the markets will sell, they will sell the bad news.” “That’s a sight,” said the Chair, “that I made them choose.”
So he watched the news and saw what happened on the Street, But while selling he saw; the Markets still had a heartbeat.
He stared down at the TV! The Fed Chair popped his eyes! Then he shook! What he saw was a shocking surprise! Every investor, the tall and the small, Was still trading! Without any gains at all!
He’d stopped the bull market! But investors still CAME! Somehow or other, they traded just the same! And the Fed Chair, with his fancy wing tipped shoes, Stood puzzling and puzzling: “Don’t they know they will lose?”
“Investors believed in free markets! Investors will choose! Choose to invest in the future because they’ve seen this before!” And he puzzled three hours, till his puzzler was sore. Then the Fed Chair thought of something he hadn’t before!
“Maybe the Market,” he thought, “Isn’t just Wall Street.” “Maybe the Market…perhaps…is consumers on Main Street!” And what happened then? Well…history books will say, That the Fed Chair’s small heart grew three sizes that day!
And the minute his heart didn’t feel quite so tight, He checked his data and said, “I won’t raise rates out of sight.” And he brought back liquidity! And the certainty investors needed! And he, HE HIMSELF! The Fed Chair finally conceded!