Central Banks Directly Buying Stocks to Boost Market

In 2014, we noted:

Several central banks are directly buying stocks. They include the central banks of Switzerland, Japan, Israel, the Czech Republic, and a total of 23 percent of all nations worldwide. (And it has long been rumored that the Fed buys stocks through proxies.)

(The Wall Street Journal adds details as to the Japanese stock purchases).

The Fed has admitted that one of its main policy objectives is to boost stock prices.  Many well-known financial analysts – such as Jeremy Grantham, Charles Biderman and Scott Nations – say that the feds manipulate the stock market. And see this, this and this.

The decade-long former president of the Federal Reserve Bank of Dallas – a voting member of the the Fed’s principal monetary policymaking group (the Federal Open Market Committee) – admitted in January (full interview):

What The Fed did, and I was part of it, was front-loaded an enormous rally starting in 2009 … in order to create a wealth effect…

And now, Citi’s Matt King (via Zero Hedge) shows that central banks – especially the European and Japanese central banks – are responsible for driving stocks to all-time highs:

What the update reveals is “a surge in net global central bank asset purchases to their highest since 2013.”

And just like that the mystery of who has been buying stocks as everyone else has been selling has been revealed.

But wait, there’s more because as King suggests “credit and equities should rally even more strongly than they have done already.”

More observations from King:

The underlying drivers are an acceleration in the pace of ECB and BoJ purchases, coupled with a reversal in the previous decline of EMFX reserves. Other indicators also point to the potential for a further squeeze in global risk assets: a broadening out of mutual fund inflows from IG to HY, EM and equities; the second lowest level of positions in our credit survey (after February) since 2008; and prospects of further stimulus from the BoE and perhaps the BoJ.

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  • slorter

    Tick tock!

    • Joann Hughes

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  • Bob

    “We do not target the level of stock prices. That is not an appropriate thing to do.” – Janet Yellen

    Actions speak louder than words, especially when you have to lie for a living.

  • “Inflation is taxation without legislation.” Milton Friedman

    The Inflation chart you will not see or hear about in the government run media!

    Is Inflation the Legacy of the Federal Reserve?

    Jan. 17 (Bloomberg) — In today’s “Single Best Chart,” Bloomberg’s Scarlet Fu displays how inflation has increased in the 100 years since the creation of the Federal Reserve.