--- title: Fed Pushes Everything Higher, Except Rates description: Stocks are at all-time highs creating a positive wealth effect for millions of Americans. 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Coronavirus has caused the largest shock to the U.S. economy in living memory. Second Quarter GDP declined at a 33% annual rate — the worst reading in American history. **What has also been unprecedented?** *The policy response.* The Federal Reserve, Treasury, and administration have responded with trillions of dollars in stimulus measures to help underwrite, or carry, the economy through this temporary nightmare — and more is coming. As the Fed eluded in the quote above, they will be keeping the overnight Fed Funds Rate at zero for years. This means rates on short-term loans like autos, home equity lines of credit, and credit cards will remain historically low for a long time. Additionally, the Fed said they will do “whatever it takes” to keep long-term rates relatively low. They are doing this through an open-ended quantitative easing program where they purchase both Treasuries and mortgage-backed securities. These “buying operations” will continue to keep long-term rates, like mortgages, relatively low. They also have other “tools” they can use to pin down rates, including Yield Curve Control. We shall see if they use this in the months ahead to further “tell” the markets they are committed to keeping rates lower for longer. **How have the markets responded?** This week, virtually everything traded higher. Stocks were nicely higher, with the NASDAQ hitting all-time highs. Precious metals like gold and silver were sharply higher, and Bonds traded higher causing yields to fall to historic lows. The 10-year Note yield entered the weekend at .51% — the lowest “closing” yield since George Washington crossed the Delaware River. **Bottom line:** Stocks are at all-time highs creating a positive wealth effect for millions of Americans. States and economies continue to re-open with millions of Americans back to work. The economic damage caused by the coronavirus will take a while to repair, so expect even more policy response with the Fed leading the charge. **Looking ahead:** Next week will be interesting and could disrupt the good vibes seen in the market this past week. The Treasury “supersized” next week’s Treasury auctions by adding billions in Treasuries to be sold. It will be important to follow the buying appetite for all of this new Bond supply with rates at historic lows. On the economic calendar front, we do have some inflation readings to follow. Inflation is a concern down the road as the economy makes progress, but not today. 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