Powell is a paper-loving, paper-printing Fed Chair. Powell has never hesitated to print his way out of a tough spot. We predict that should the equity markets roll over another 10-15 percentage points Powell and his band of merry Federal Reserve Board members will seek to support the equity markets with Equity ETF purchases.
The Fed has already purchased fixed income ETFs both investment grade and high yield. Further, the Fed’s various direct lending facilities (Is it correct to refer to the facilities as loans? They will ultimately be forgiven), have covered all sorts of credit types (historically the Fed was limited to government agency securities). It seems that equities are the only virgin territory that Powell has yet to violate. Our bet is that he will do so within the next 3 months.
Powell will likely begin with a Russell 3000 ETF so as to seem fair and equitable given that the Russell 3000 reflects exposure to the entire stock market. In terms of individual equities, the big winners will be “Big Tech”: AAPL, AMZN, FB, GOOG and MSFT. Big bubbles get bigger. Other Tech names that have yet to run – INFO and SSNC for example – will benefit as well.