Federal Reserve’s Success Or Failure Should Not Be Measured By Whether It’s Propping Stock Prices Up!

Every time the Fed makes a bold move these days, and it’s made many, and the market “fails” to react, we see a headline like this:

“Dow falters despite Federal Reserve action” (Washington Post)

But no! We mean, yes, stronger stocks would be a nice aftereffect of the Fed’s moves, but boosting stock prices is not Job #1 for the Fed, nor should it be. The stock market’s response to a massive trillion dollar plus bailout bill from Congress, which will eventually pass (still probably sooner than later), will be a much fairer test.

One might argue that the number of times the Fed has had to intervene, including the most recent announcement it will support the financial markets with in effect an unlimited amount of money: “the amounts needed” is how the Fed puts it, is proof that it isn’t really getting the job done. And that might come closer to a legit criticism. Or at least that what it just announced it’s doing is something it was already doing anyway. The fact that the Dow or the S&P isn’t back on the rise has very little to do with it.

At the same time, except for Treasury Bonds, the bond market right now has…