Has the Switch Been Turned?

03/04/2015 12:01 am EST


Jim Jubak

Founder and Editor, JubakPicks.com

MoneyShow's Jim Jubak highlights how it seems like central banks are going to be supporting the markets again, and as a result, money can be put at risk once more.

Yahoo! Now if I were a singing cowboy, I'd be singing “Central banks back in the saddle again.” That's where we are after we've got the Greek crisis over, we've got pending asset purchases by the European Central Bank, and we've got a Fed that says, “Hey, we're going to keep rates low, the market interprets, until September.” All those things suggest that what we've done is move back to one of those glorious “fear on, fear off, risk on, risk off” switches that we've seen in the market over the last couple of years.

Right now what we're seeing is that the market believes we're going to have very, very supportive monetary policy, money printing—roll those printing presses—from both the ECB and the Fed and that would mean that you can, therefore, put more money at risk because both of those central banks are going to be supporting the market with big cash infusions.

I think the switch has been turned. I think that's where we are at the end of February as we go into March.

Whether that all works out at some point in this market—since there's not a whole lot of really factual evidence to separate the risk on trade from the risk off trade—I think what you get is, you get this moving on for a while and then people go, “Oh gee, let's see, what can I worry about this time?” I'm Macauley Culkin—I'm doing lots of imitations today—or is it The Scream by Munch? I don't know what we want to do.

Anyway, we go back to switch the other way but right now we're certainly in the let's go with the central banks—not so much because we know the Central Bank policy is going to work but because hey, money is flowing, interest rates are staying low, we're going to put a lot more money to work that supports the market, and we'll go with that for a while because we really don't have a whole lot of deeply felt alternative ways of approaching this market.

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