A case could be made that the symptoms were all too obvious. But in the tech-led world that we live in, P/E ratios and book values mean increasingly less as to whether a company is properly valued or not. The current level (as of April 30th, 2020) is 27.27 – still ranking in the top 25th percentile.
Don’t fight the Fed. Don’t even stand in its way.
Following multiple cuts in March, interest rates have been slashed to 0 and the Fed is using tactics from its crisis playbook. The federal funds rate (what banks charge one another for short-term borrowing) is the lowest it’s been since the financial crisis. Deemed unimaginable by some experts, the US may even consider following in Europe’s footsteps by going to negative rates.
For the last few months, the Fed has been pulling out all the stops. The series of relief injections has included programs like the Money Market Fund Liquidity Facility (MMFLF), the Primary Dealer Credit Facility (PDCF), and all the other multi-letter acronyms they have at their disposal.
But that’s not all – on May 12th the Fed will begin its program to purchase corporate bond ETFs. The idea is to prop up devastated industries (like airlines, hotels, restaurant chains, etc.) in order to avoid a cataclysmic chain reaction of corporate failures. Seems like the money printer will be going ‘brrr’ indefinitely.
As a result, the Fed’s balance sheet has grown by $2.56 trillion
since February 26th of this year alone. For reference, the total amount was just $870 billion in 2008.