The Everything Market

Recent Fed easing has finally brought a cocktail of “full support” normally evident only at the front end of a bull market which commonly leads to an “Everything Market”!

The Federal Reserve finally deciding to ease last week (and really the growing expectation among investors that they would finally ease during the last couple months) marked a big change for this bull market.  This is the only bull market in post-war history where the Fed has tightened during its entire existence.  That is, until recently, the contemporary bull market lacked Fed help and thereby commenced without the normal “Full Support” the stock market usually receives at the beginning of a new bull market.

Traditionally, bull markets are ignited because rising recession fears cause the Fed to ease monetary policy even before a bull market begins.  As a result, the stock market suddenly enjoys several positive forces it previously did not receive.  When the Fed drops short-term interest rates, bond yields also decline, inflation typically moderates (disinflationary power), the money supply tends to quicken, and fiscal juice begins expanding.   Finally, because of the introduction of these positive events, expectations of improved economic growth and profitability emerge and both consumer and business confidence rise.    It is this cocktail of “full support” at the front end of a bull market which commonly has created an “Everything Market” during the early part of a new bull.  That is, for a period, almost everything simultaneously rises – value, growth, small, large, defensive, and cyclicals – and usually by a lot!