Does money grow on trees? Well, it kind of does; it actually grows in the hypothetical basement of the Federal Reserve where they “print” it digitally. In 2020, the Federal Reserve has been “printing” a lot of it. Notable Number 4 in this week’s Weekly Market Review details that the Fed’s balance sheet has ballooned by 2.25 trillion dollars in just over three months. Allow me to expand that out for you in long form… the additional debt our county created in just three months was $2,250,000,000,000.00.
The giant increase of money supply has again driven interest rates to record lows which encourages and stimulates financial activity such as borrowing for homes, cars, investment and business ventures. One clients said it best, “it is grease on the wheels of the economy.” The Federal Reserve has definitely put the grease on the wheels in an effort to keep them spinning. Certainly, money being created at this pace brings questions about the value of the dollar and inflation longer-term. The Federal Reserve has acknowledged that they have to worry about today before they worry about tomorrow.
When I think about the consequences actions like this create, as an investor, I am reassured that I am not investing in stock of the US Government, or any government for that matter, but rather the long-term profitability of well-run corporations. Investing in the world’s leading companies has proven to be very financially rewarding over time. We expect the future for long-term investors to continue to be a successful wealth building tool.
As always, we hope you find the Weekly Market Review both interesting and informative.
Trevor N. Coe, CFP®