However, in sympathy for complacency, the same underlying thesis remains intact that propelled risk assets off their March lows when the world was in the thick of the pandemic induced crisis. Central banks will not stop here and the determination of investors to hunt yield cannot be taken lightly.
Although, with the election uncertainties mounting, lagging fiscal and spectre of fresh lockdowns don’t expect a repeat of Augusts parabolic move higher. At this stage it is doubtful US markets can recapture highs prior to the election.
The Fed’s pain threshold may only be another 5% lower, the inexorable bubble being blown in risk assets leaves nowhere else to go. Fed programs have paused in recent weeks and there is capacity to add, with more tangible direction on QE a starting point following the lacklustre reaction in risk assets to the new AIT regime. Although, further actions undoubtedly representing the true definition of Albert Einstein's idiom on insanity.
"Insanity is doing the same thing over and over again and expecting different results.".
These are all temporary solutions exacerbating problems we cannot escape with present policy – like asset price inflation fuelling mounting social inequalities and wealth disparities, inter-generational inequalities, and the proliferation of zombie companies.
There is only so much monetary policy can do here and the US economy is in desperate need of more fiscal.