Question

There is discussion now that the new fed chairman has a very loose/liberal money policy given the COVID 19, what do you think would the effect of such policy on the time value of money and value of stocks versus bonds. Would you be interested in investing more in stocks or bonds as a result of such a policy and should that be a function of your age?

Please provide original response and not copied. Even a low word count is appreciated.

Answer 1

The Fed responded rapidly and dramatically to keep the U.S. economy from descending into depression. Monetary policymakers reduced the benchmark fed funds rate to near zero; promised to more than double the size of the Fed's balance sheet by engaging in large-scale asset purchases of Treasuries and mortgage-backed securities, with the intent of reducing longer-run interest rates; and restarted or created a number of special purpose vehicles (SPVs), which are off the Fed's balance sheet, to stabilize a broad array of financial markets.