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The Fed's Artificial Fourth Quarter Stock Market Boom - Nathan McDonald (08/11/2019)

The Fed's Artificial Fourth Quarter Stock Market Boom - Nathan McDonald (08/11/2019)
By Nathan McDonald 11 days ago 2819 Views No comments

Nov 08,2019

Quantitative easing in the United States is alive and well. The markets know this, and they are surging higher in the fourth quarter as a result, creating an artificial move higher in the S&P 500.

This steady tick upwards comes in spite of the fact that the global economy—including within the United States—is actually beginning to slow down, as the stress of the ongoing trade wars continues to weigh heavily on the system.

One of the major warning signs comes from the U.S . manufacturing sector, which in recent months has taken a sharp turn lower, as recent reports indicate:

Truck and trailer order rates are down between 50% and 70%. General distribution, a proxy for smaller machine shops and fabricators, is off by 4% to 7%. Automotive is down by 4%.

Typically a slowdown in U.S. manufacturing is then followed by a slowdown in U.S. non-manufacturing sectors, which then leads to a cascading effect as a full-blown recession takes hold of the economy.

Despite these warnings and the risks that the world faces in the fourth quarter of 2019, the markets steadily and happily truck along, moving higher in price month after month.

This can largely be attributed to the direct, blatant manipulation that the Federal Reserve has engaged in since the September scare in the overnight lending repo markets, in which the Fed had to intervene in order to prevent a crash within the banking sector.

Since this time, the Federal Reserve has continued to pump a monstrous amount of money into the system, doing what the Fed does best: throwing money at the problem in hopes of plugging all leaks with massive wads of cash.

Financial and geopolitical guru Jim Rickards recently tweeted out the following chart, which highlights just how rapidly the Fed's balance sheet has exploded higher:

This sharp move higher is due to the Federal Reserve injecting a stunning $175 billion in cash directly into the markets, pushing their balance sheet back up to $4.07 trillion and undoing much of their recent work in "exiting" the markets, proving correct my prediction that once they tried to get out, the system would begin to fall apart and they would be forced back in.

Coincidentally, this injection into the system almost exactly matches the 4% rise higher in the S&P 500, as the Fed's balance sheet has expanded by 4.5% since the Fed began once again to engage in "Not QE".

There is no getting out for the Fed. This is the system they have created, and QE to infinity is here to stay. They are trapped, and so are we. The system is completely broken, rotten underneath the surface, and papered over with ungodly amounts of fiat currency.

Ray Dalio, Co-Chief Investment Officer & Co-Chairman of Bridgewater Associates, also vented his frustration with the current state of the system, penning a great article explaining the mess the world now finds itself in, titled " The World Has Gone Mad and the System Is Broken".

Ray Dalio isn't wrong. The world truly has gone mad, and it is only a matter of time before the day of reckoning arrives, sending inflation soaring higher, markets reeling, and precious metals rocketing higher.

Until that day, enjoy the discounts. Keep stacking, and keep preparing.

About Sprott Money

Specializing in the sale of bullion, bullion storage and precious metals registered investments, there’s a reason Sprott Money is called “The Most Trusted Name in Precious Metals”.

Since 2008, our customers have trusted us to provide guidance, education, and superior customer service as we help build their holdings in precious metals—no matter the size of the portfolio. Chairman, Eric Sprott, and President, Larisa Sprott, are proud to head up one of the most well-known and reputable precious metal firms in North America. Learn more about Sprott Money.




Nathan McDonald is a libertarian, entrepreneur and precious metals enthusiast. He has always taken a keen interest in free markets and economics since an early age, which naturally led him to become a true believer in precious metals and all that they stand for.

Nathan served eight years in the Royal Canadian Navy as an electronics technician, seeing the true state of the world, before starting his first successful business. He has since gone on to create a number of businesses, all of which are still in operation and growing.

In addition to this, Nathan runs a network of successful precious metals blogs, and a growing newsletter that has attracted readers from all around the world. He is a regular and highlighted writer for the highly respected Sprott Money Blog, which covers world events, geopolitics and of course precious metals.


The views and opinions expressed in this material are those of the author as of the publication date, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.You may copy, link to or quote from the above for your use only, provided that proper attribution to the source and author is given and you do not modify the content. Click Here to read our Article Syndication Policy.

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