Stock Market Drives Economy, Fed's Put Persists
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- David Rosenberg argues the stock market now drives the economy, with speculation and household wealth creation outweighing traditional capital formation.
- Torsten Sløk notes the count of unicorns—private firms valued over $1 billion—has risen to 857 from 114 a decade ago, indicating IPOs are used mainly for insiders to monetize holdings.
- Alan Greenspan instituted the “Greenspan put” after the 1987 crash, pledging liquidity to support the financial system, a policy that has persisted under successive Fed chairs.
- Ben Bernanke launched quantitative easing with QE1 in November 2008 and QE2 in November 2010, explicitly tying stock‑market gains to boosting consumer confidence and spending.
- Jerome Powell expanded the Fed’s asset purchases to corporate bonds during the pandemic, inflating the balance sheet to nearly $9 trillion and fueling asset‑price inflation.
- Kevin Warsh warns that prolonged easy‑money policies have inflated asset prices, posing a challenge to Wall Street and questioning the durability of the Fed’s “put.”
- Trump administration introduced “Trump Accounts,” seeding newborns with $1,000 invested in a U.S. index fund, exemplifying policy aimed at institutionalizing a bull market and creating a K‑shaped economy.
Why it matters: Equity wealth now eclipses wages as the main driver of consumer spending, creating a K‑shaped economy where asset owners gain while wage earners fall behind, and the Fed’s enduring “put” and QE policies sustain inflated asset prices that may distort market cycles.
