Investors have increased their appetite for risk as the market continues to climb to new highs. There was a tremendous amount of fear in April that growth was not going to be sufficient to maintain such lofty levels on the major averages. Economic data was beginning to surprise to the downside and many felt that a long awaited pullback was just around the corner.
CNBC had to be feeling good about itself last week. Not only did it have the pleasure of highlighting some dubious business practices employed by its competitor Bloomberg, it also had the good fortune of conducting the interview heard around the capital markets world last Tuesday.
Based on both recent history and mainstream economic theory the past few years should not have been possible. When you cut interest rates to near-zero, run deficits of 10% of GDP and buy up every government bond in sight with newly created currency, you get a boom, end of story. That’s just the way capitalism works.