Motilal Oswal: Trying To Make Sense Of U.S. Economic Policies, When Success Seems Worse Than Failure  

Motilal Oswal Report

Last week, the U.S. Federal Reserve gave a clear verdict through its actions. Amid the ongoing debate on global inflation, the Fed seems to have chosen its side – ‘inflation is not an imminent threat.’

Not only has the Fed replaced inflation by employment (or growth) as its primary mandate, but has also relaxed inflation target. It now seeks to achieve an average inflation of 2% over time.

Not surprisingly then, the divergence between the real economy and the stock markets has widened further, with the latter conquering new all-time highs.

In this note, we have penned down our thoughts on ‘Why the U.S. Fed seems oblivious to the growing divergence between the stock market and the real economy?’

We argue that by pushing the stock markets higher, the Fed is trying to create a positive ‘wealth effect’ for American households, whose exposure to equities is as high as approximately 45% of the total financial assets – the highest in almost past half the century and also the highest compared to any other nation.

With the U.S. monetary policy being totally aligned with its fiscal policy, there is only one clear objective – making Americans feel prosperous and wealthy.

Overall, it appears that the U.S. policymakers are all-out now to lead better recovery.

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. BloombergQuint does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the brokerage and do not represent the views of BloombergQuint.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.