Here’s an interesting article from the Wall Street Journal, taking the meme of a ‘Bernanke put’ (and the ‘Greenspan put’ before it) and applying it to Janet Yellen’s stewardship.
- While both men denied it, former Fed chairmen Alan Greenspan and Ben Bernanke were both thought by many to be willing to step in and stop stock markets from falling too far
Bank of America/Merrill Lynch have attempted to quantify “how far stocks would have to slide to cause the Fed to either extend or restart a bond-buying program that’s currently on track to end this month”:
- In 2010 and 2011, the Fed stepped in following equity corrections of 11% and 16%, respectively
They go on (bolding mine):
- “it may take a further 10% decline from the recent lows” for markets to begin anticipating that the Fed will restart its bond buying to buoy markets and help prevent the lost wealth from causing broader economic problems
The Journal says that the reignition of the Fed “put” idea stems from the unexpected comments last week from St. Louis Fed President James Bullard
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There is more at the article, it is ungated: How Far Do Stocks Need to Fall to Get the Fed to Intervene? Bank of America Offers a Clue
