The Dow Jones Industrial Average hit its highest mark ever on Tuesday, soaring to 14,226.2 at 9:40 AM.
Propped up by the Federal Reserve’s stimulus purchase of over $2.5 trillion in Treasury and mortgage-backed securities, the Dow’s new record calls into question the Fed’s decision to continue printing more money and pumping it into the economy.
“The risky little secret of the rebound is that it is powered in significant part by the easy-money policies of the Federal Reserve, which must one day end,” writes the USA Today editorial board.
Currently, the Fed is engaged in a monthly $85 billion bond-buying scheme that it says will continue until unemployment drops from its present 7.9% to 6.5%. But with the Fed having tripled its portfolio since 2008, the Dow rally may exert greater pressure to end or reduce that. As Dallas Fed Chairman Richard Fisher has said, the market is “hooked on the drug” of the government’s easy money policies.
“Markets might not like the idea of the drug being withdrawn now, when the Fed holds a portfolio of $3 trillion. But the withdrawal symptoms will be a lot worse once the portfolio grows to $4 trillion, or more,” says USA Today.