Draghi and the ECB Should Play Big

Europe has been on fire off the lows over he last couple of weeks. Even Greece, the lamb stew nation that masquerades as a country, is trading like all of their debts will be forgiven and the worst is over.  I feel sorry for a Greece in a way, they’re basically a good people with huge problems (most self inflicted), but now they have a migrant crisis that could upend everything that is trying to be fixed.

If you look at the stocks and etf’s of Europe, they have all rallied hard off the lows with everything else. Europe  though is a special case, its a work in progress that needs constant help form the ECB.  So this is why the Draghi message will be so important on Thursday, not only for Greece but for all of Europe and the US market.

The European Central Bank is expected on Thursday to push a key interest rates even further into negative territory, a move that is at once widely anticipated by markets and viewed with trepidation.  The ECB’s action likely will drive down government-bond yields, further reducing borrowing costs that are already near record lows in many nations.

Trading will likely be volatile and markets could be roiled if the ECB provides less stimulus than expected.  Many remain skeptical about the benefit of negative interest rates in stimulating growth and inflation and many are concerned but unintended consequences.

Don’t forget the global bank-stock selloff that followed the Bank of Japan’s decision at the end of January to adopt negative rates.  Markets tanked.  So nothing’s a layup.

Personally I just wonder of all this QE just hasn’t overstayed its welcome and therefore going forward will have a muted, if not a negative effect.

The markets basically flat-lined today and chopped around, but the Nasdaq is struggling as the FANG stocks look absolutely heinous.  They will need to get there ct together for the Nasdaq to get back on its feet.

I wrote this post on the FANG’ s a few weeks ago, so far it looks like those wedges are breaking lower. Its not the end of the world for these stocks, but a  reversal soon would help the Nasdaq.

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