Federal Stimulus

Enacting a monetary policy to offset a cataclysmic economic or financial event

History of Quantitative Easing (Domestic and International)


Since the Great Recession, the Federal Reserve has acted as a "Life-line" to Wall Street banking institutions. When the Federal Reserve enacted monetary policy to offset a perceived financial Armageddon, some of the key rules that govern the inner-market trends have been set in opposition. Understanding this phenomenon, and how it evolved, is crucial when investing in a post-pandemic recovery.


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Federal Stimulus and market manipulation


The rules of the stock market have greatly changed since the arrival of the federal stimulus. Prior to the Federal Reserve's intervention, any such monetary "help" from the Federal Government to aid Wall Street was interpreted as an unnatural and/or unhealthy response to a free market. Those days are long gone and there is a whole new set of rules the market is trying to understand.


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Future of monetary policy


What will become of the financial markets as we progress into an age of monetary policy? Will we be able to navigate effectively with a new set of rules? We're in uncharted waters and the new rules of market engagement have yet to be understood.



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WISE Investments

New Podcast Series: PostPandemicInvestments.com

An educational podcast series dedicated to financial awareness for both novice and seasoned investors. We discuss the ideology into creating this one-of-a-kind educational resource center, focusing on financial awareness within a post-pandemic reality.

Listen to the Federal Stimulus here.

Frequently Asked Questions

Financial Stimulus and Monetary Policy

What is the federal stimulus or quantitative easing?
Federal stimulus is a method of monetary control enacted by the Federal Reserve to offset financial turmoil in either the stock market or some economic sector. In the last 15 years, there has been over $7 trillion of federal stimulus added to our deficit to offset the long-term implications of the Great Recession and the arrival of the pandemic.
How can federal stimulus or quantitative easing affect the stock market?
In the past 15 years the stock market has rallied quite considerably due to speculation that the Federal Reserve will act with another round of quantitative easing. At the same time, there have been situations where the stock market earnings have retracted by news that the Fed is not going to intervene with additional stimulus. This type of market manipulation was not even contemplated prior to the Great Recession (2007).
How can federal stimulus create long-term exposure?
For decades, prior to the Great Recession, it was believed that you could not buy your way out of a problem and even the slate. It was thought that any type of "stimulus fix" would bare severe consequences for the long-term.

That ideology went out the window at the start of the Great Recession. The truth is, we're in uncharted waters and some of the economic indicators that we used in the past have are no longer relevant, making it impossible to see what's coming. It's anyone's guess on what comes next (generally speaking) or how long it'll take to figure it out.

Does the enactment of federal stimulus and quantitativeeasing work?
It depends who you ask. If you're talking about a short-term fix, then yeah, it has worked in the past. After all, we were able to avoid the financial apocalypse through the implementation quantitative easing. But, outside of the immediate fix, there are serious implications to consider.

Thinking long-term, the consensus is that it'll be more harmful than good. All of the federal stimulus gets added to the US deficit and can contribute to a weaker dollar. Not to mention all of the excess interest payments coming from this added debt. Additionally, if the stimulus gives the stock market an easy way out to combat volatility, what's the motivation to push harder if the downside scenario is already covered? Meaning, it's not a natural remedy for a struggling economy. Instead, like we're seeing now, it creates an uneven balance that is very difficult to analyze.

Markets today by TradingView

HISTORY OF THE FEDERAL STIMULUS

“Government spending is taxation. When you look at this, I've never heard of a poor person spending himself into prosperity; let alone I've never heard of a poor person taxing himself into prosperity.”

Arthur Laffer - Financial Writer

How the Government Creates Stimulus Money | WSJ

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