Forget the rate cut: BlackRock’s $1.9 trillion bond chief told us of a more significant bombshell the Fed just dropped on markets — and explained how investors can start profiting from it
, Powell reminded investors that the Fed is committed to purchasing Treasury bills at least into the second quarter of 2020.after a liquidity crunch in September, with the goal of keeping interest rates within its intended range.
Powell's reassurance that these purchases will persist for several months was "unequivocally more significant than dropping rates further," Rieder said by phone in an exclusive interview shortly after the press conference concluded. The Fed's Treasury bill purchases have evoked memories of the now-ended quantitative easing program, which was conducted at a much larger scale and in more dire circumstances.
But for Rieder and other market observers, the Fed's initial retreat from QE created a new problem: it diminishedThat's why Powell's reassurance on Wednesday was significant: it sent a strong, positive message to investors who were"You can feel comfortable investing," he said. "That is a really big deal. People for the last three months thought the world was coming to an end.
Investors now have the green light to own risk — whether in stocks or in short-term Treasuries — because the Fed will be a responsive support mechanism, Rieder said.
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