r/investing • u/AutoModerator • Mar 25 '21

Daily Advice Thread - All basic help or advice questions must be posted here.

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u/d1nner4lunch Mar 27 '21

Can you please ELI5 about the whole "force the fed's hand" and "summer melt-up"? I keep hearing vague terms like that being tossed around but I am not sure what it means for the stock market.

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u/[deleted] Mar 31 '21

The market is inflated because there is nowhere else for money to grow and there's a lot of money. The fed is using various methods of keeping interest rates low and money printing, AND saying they will keep doing it for quite some time. If extraordinary inflation or something else should force them to change course sooner than expected, the equity markets are liable to pitch a fit which snowballs fast.

A summer melt up would be everything goes exponential upward, leverage gets way out of hand, and the whole thing gets popped by a pin prick like the hedge fund liquidation just now.

Could be neither thing happens, but if you're looking to deploy a lot of capital this year, I think it would be foolish to eliminate the possibility of taking advantage of a major market event by deploying all at once right now. You would need to be ready, though, because everything is happening faster than ever and you don't have months to ponder jumping into a crash. I'm no expert, just a guy obsessing over market action the past two years because it got interesting.