It’s easy to keep the stock market at all-time highs when central banks are the ones buying stocks
The spectacular rise in stock prices since Donald Trump won the Presidential election last November has been nothing short of miraculous. ¬†In fact, the moves in the Dow to both 21,000 and 22,000 were done in some of the shortest lengths in market history.
But what is perhaps most interesting in all of this is how these moves were done with¬†trading volumes being some of the lowest in many years… that is until you realize just who is buying stocks, and keeping the prices from falling during any and all attempts of a counter-trade.
In the second quarter of the year, one in which unlike in Q1 fund flows showed a persistent and perplexing¬†outflow from US stocks and into European and Emerging Markets, a trading desk rumor emerged that even as institutional traders dumped stocks and retail investors piled into ETFs, a “mystery” central bank was quietly bidding up risk assets by aggressively buying stocks. And no, it was not the BOJ: the Japanese Central Bank’s interventions in the stock market are familiar to all by now, and for the most part the BOJ keeps its interventions local, mostly propping up Japanese stocks, whether the Nikkei 225 or the Topix.
The answer was revealed this morning when the hedge fund known as the “Swiss National Bank” posted its latest 13-F holdings. What it showed is that, as rumored, the Swiss National Bank had gone on another aggressive buying spree in the second quarter, and following its record purchases in the first quarter, the central bank boosted its total equity holdings to an all time high $84.3 billion, up 5% or $4.1 billion from the $80.4 billion at the end of the first quarter. –¬†Zerohedge
The Swiss are not the only central banks buying equities in the U.S. stock markets, as Japan has invested billions of dollar equivalents into them as well. ¬†And of course there is the secret not-so secret trading desk in the basement of the Federal Reserve who constantly keeps the equity markets up through their buying the VIX, S&P futures, and the Yen currency.
It should come as no surprise that investors and traders have all but given up on shorting stocks, since their capital cannot compete with a central bank’s ability to print unlimited money out of thin air to counter their trading strategies. ¬†But the bottom line is that what we have seen, and are seeing in the stock markets is little more than an illusion, as some of the biggest holders of stocks today are the same central banks that rig currency prices, gold, and of course, bond yields.
Kenneth Schortgen Jr¬†is¬†a writer for¬†The Daily Economist,¬†Secretsofthefed.com,¬†Roguemoney.net, and¬†Viral Liberty, and hosts¬†the popular¬†youtube podcast¬†on Mondays, Wednesdays and Fridays.¬†Ken can also¬†be heard Wednesday afternoons giving an weekly economic report on the¬†Angel Clark radio show.