Why The Fed Keeps Propping Up The Market

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·@finprep·
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Why The Fed Keeps Propping Up The Market
The Fed has the market's back.  Although they are not coming out and saying it, this is the case.  Each time the market suffered a pullback, central banks around the world stepped in.

There is a reason they are doing this.  There is a correlation between stock prices and household wealth.  They run pretty much in tandem.  When the stock market is up, household wealth increases.  

This leads to what is called the wealth effect.  People are more apt to spend when they feel wealthier.  Household wealth padded by a propped up stock market is a way to prevent the wealth effect from operating in reverse.

Under this scenario, people stop spending since they feel poorer.

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