What's going on?

The Federal Reserve (the Fed) announced on Monday there�d no limits to its bond-buying to support the US economy (tweet this).

What does this mean?

The Fed announced $700 billion of new bond purchases this time last week, and by Friday, it�d already completed a batch of them. But maybe it didn�t see the immediate reaction it was hoping for � that is, more business loans. Or maybe it was concerned the US government hadn�t agreed on its own spending plans by the weekend. Either way, the Fed decided to unveil even more spending.


On top of unrestrained government bond-buying and ongoing support for super-short-term lending markets, the Fed announced several new programs: it�d buy up corporate bonds � as well as debts related to credit card, car, and student loans � in an effort to free up cash across the economy. It promised to roll out a plan for small, independent businesses outside the finance world too.

Why should I care?

For markets: Fighting against gravity.

After the government failed to agree on a spending package, the US stock market looked set to fall as far as it could without triggering an emergency 15-minute break. But it actually ended up having a positive start to the day following the Fed�s announcement, albeit temporarily. Hedge funds, for their part, might use that to encourage investors to give them even more money. Their pitch? �Buy the dip� and profit from any eventual recovery in asset prices. They probably glossed over the bit about most hedge funds having lost money this month, mind you.

The bigger picture: The holy trinity.�

According to Goldman Sachs, the speed of a stock market recovery depends on how quickly the virus is contained, whether companies have enough cash to survive the next three to six months (which the Fed�s trying to help with), and whether government spending can stabilize the economy. A quickly contained virus accompanied by shuttered businesses and lost jobs, for example, will slow any recovery significantly.