Up to $2 trillion in liquidity into the banking system should do the job in the financial sector.
This is highly bullish tech shares and the growth-based tech stocks will experience the best windfalls from this psychological and fiscal reset of the American banking system.
It’s true tech stocks did need a little help as 2022 was really a struggle for them, but 2023 has been brighter with the “buy the dip” mentality back with vengeance.
After the gangbuster January, we’ve been waiting for some direction as to what will happen to tech stocks and now we have gotten the signals.
In short, tech stocks will go higher.
Now, I truly believe that the buy-the-dip mentality will become firmly entrenched and investors should dig deep to execute bullish positions as I expect tech stocks to roar ahead.
Many know about the FDIC, SPIC insured deposits of up to $250,000, but the Fed has rolled out the red carpet for the banking system and lent money to the banks that even don’t need it.
Banks borrowed up to $350 billion in cheap loans from the Fed.
Nearly $143 billion went to holding companies for two major banks that failed over the past week, Silicon Valley Bank and Signature Bank, triggering widespread alarm in financial markets.
Ironically, public tech stocks benefited the most from the government helping the financial industry and it was a crypto-biased bank that bled itself to edge of catastrophe.
Although this creates a moral hazard, I am not really in the business to tell someone what is right or what is wrong in terms of systemic risk.
But knowing that the Fed has the backs of the banks and stock market no matter what is highly bullish for tech stocks in the short-term.
This opens up liquidity like a reservoir opening up its water channels.
Expect a lot more capital sloshing around the financial system that will naturally fall into tech stocks from the boring behemoths to the cash-burning peons.
The tide will lift most boats in this situation.
The bank term financing program should be able to inject enough reserves into the banking system to reduce the reserve deficit and reverse the tightening that took place last year.
I anticipate that the new program will be attractive to a wide range of institutions, apart from those currently facing liquidity problems.
The longer this program sustains itself the better for tech stocks.
Say goodbye to quantitative tightening.
The era of balance sheet reduction is now dead as the Fed is too worried to rock the boat.
Going from QT to printing money which is what this discount window effectively was has stunned the market to the upside.
Moving forward, expect rate hike expectations to dissipate and lower bond yields which will contribute to another tech market rally and in turn a lower dollar.
Most of everything will have a high chance to deliver decent tech gains from ARK Innovation ETF (ARKK) to the Apple’s (AAPL) and Google’s (GOOGL) of the world.
When the Fed wants to widen the goalposts this wide, you don’t need Ronaldo to score a goal.
Buy the dip in tech until we truly see a systemic credit risk or if inflation comes back shooting past the first pandemic peak to form a double top.
