Fed Chair Jerome Powell testifies about the CARES Act report on December 1, 2020.
Susan Walsh-Pool/Getty Images
It wasn’t just rich Americans that profited from Fed-fueled market rallies. The global elite benefitted, too.
Rate cuts sparked a buying spree in the housing market and led investors to bid stocks higher.
As the Fed goes, so goes the world’s economy, and the fortunes of the global elite.
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The Federal Reserve saved the economy during the pandemic, and, in doing so, made America’s wealthy class wealthier.
But they aren’t alone. The entire global elite benefited from the actions America’s central bank took to prevent economic catastrophe.
The global rebound from virus-fueled recession has featured extraordinary rallies across asset classes. Global stocks surged 33% above pre-pandemic levels and home prices rocketed higher all across the globe.
Both trends were largely powered by the Fed. The central bank pulled interest rates close to zero and started buying Treasurys and mortgage-backed securities in March 2020 to bolster financial markets and encourage spending.
The emergency actions indirectly boosted major markets. Expectations for years of easy monetary conditions led investors to furiously bid stocks higher. The rate cuts also kicked off a homebuying frenzy as people rushed to lock in rock-bottom mortgage rates.
The Fed led the way, and similar outlooks from other central banks saw such activity spread around the world. Global home prices rose at the fastest pace in four decades and show “little sign of stopping,” JPMorgan economists led by Joseph Lupton said Monday. Intense home-price growth emerged in the US, Turkey, Russia, Korea, Australia, New Zealand, Brazil, and Czechia, they added.
The global stock and housing rallies padded the pockets of those best prepared to weather the pandemic. The world’s wealthy class has the most exposure to both markets. And unlike the …read more
Source:: Business Insider