At the start of November, in a moment of brutal honesty, JPMorgan’s quant strategist Nikolas Panigirtzoglou made a remarkable admission: there is nothing better for stocks than another economic catastrophe such as a new round of lockdowns. Why? Because more economic pain means even more Fed intervention (especially in a world where the Congress is hopelessly deadlocked on additional fiscal stimulus). Here is what Panigirtzoglou said:
Although it has had a negative impact in the short term, the reemergence of lockdowns and resultant growth weakness could bolster the above equity upside over the medium to longer term via inducing more QE and thus more liquidity creation.
This was a stunning admission because JPM effectively said what “tinfoil blogs” had been saying for over a decade: that the worse the economy gets, the better it is for risk assets as the Fed has no choice but to step in and keep bailing out bulls as the alternative – a full-blown market crash – is simply an inconceivable scenario for a country where private sector financial assets now represent a record 6.2x the GDP…
Continue Reading