The market is betting that the Federal Reserve could ramp up its bond purchases soon and believes that will be good news for
the stock market.
Societe Generale strategist Albert Edwards, noted for his dismal views, contends it’s missing the point.
What the economy really needs, Edwards says, is fiscal stimulus. Election results are pointing to a split Congress, with Democrats in control of the House and Republicans in control of the Senate. Republicans have less political will for massive fiscal spending than Democrats have. Democrats want to see a package of several trillions of dollars, while many on Wall Street expect a Republican-driven bill to be below $1 trillion. Edwards, though, believes that “fiscal stimulus or reform will be off the table for the next two years.”
And that means one thing, Edwards writes: “More Fed intervention to sustain markets—and that is