The Fed is being pushed into finding scope with negative interest rates

The search for yield in the current market environment has become an ever increasing theme that's gaining momentum from global central banks persistent decision to drastically rely upon the effects of fictitious money creation to kickstart the world economy. The unabating actions of these institutions has meant markets around the globe face the difficulty of finding decent returns and the prospects of being flooded by a wave of excess liquidity created in a monetary stimulating frenzy.

As the flow of money supply entering the global financial system eclipses the actual demand for it, investors are swept into seeking out riskier investments than usually accepted placing them with a grave dilemma to contend against. Either ignore the consequences of the risk or face having your money stagnate and in some cases drawn down when participating in negative interest rate deposits.  

ICYMI! The global high yield #spread has tightened by over 300(!) basis points since February this year. pic.twitter.com/EKTDjIzKhv

— jeroen blokland (@jsblokland) August 24, 2016

Debate has raged over whether Federal Reserve chair Janet Yellen, set to speak at the annual Economic Policy Symposium tomorrow in Jackson Hole Wyoming, will clear up any uncertainty regarding the bank's once ambitious belief of progressive hikes in the interest rate which has been halted by the emergence of economic distress outside its borders.

However as much as Fed officials try desperately to throw smokescreens in front of market participants by speaking of minatory prospects of interest rate hikes, markets aren't taking the bait and continue to drive developed nations yields further into negative territory.

The Fed realises that should it pursue further interest rate increases the gains obtained from those seeking out yield could ultimately gravitate into financial catastrophe leading many to believe the might of this trend will eventually forced the Fed to conform to the existing inclination on the part of other central banks such as Bank of Japan and the European Central Bank in feeding the market's mammoth appetite for stimulus and thus dismantling the possibility of normalisation in interest rates.  

Is the S&P 500 ready to rally past its all time highs?

Wealth management firm Merrill Lynch believes the lengthy period of time the market has been waiting to register fresh highs on the S&P 500 is a bullish scenario for investors. They went on to say that investors will be hesitant to chase the market back into the previous highs but if it were to happen it would definitely restart the bull run that's been firmly in place since 2009.

In yesterday's blog I broke down analysis of the S&P 500 on a quarterly and weekly basis saying the chart exhibited a few elements that would suggest an upward move on the way however I also warned that the current poor economic outlook was affecting sentiment and could possibly unhinge any promise coming from the rallies.

A number of uncertainties continue to haze the long term view with the impending British referendum "Brexit" sending volatile impulses through the global financial system together with the experimentation of negative interest rate policy in both Japan & Europe as well as dim economic activity out of US that's strong enough to showcase as one of the few countries in the world growing but weak enough to give way under the weight of an interest rate hike.

It seems as one economic calamity falls off the radar screen another appears hastily to fill up the void with panic instead of settledness. How long can this farce last? Long enough for many to believe there's still a chance to see an uptick in stock indexes around the globe. With every wake of additional stimulus added to an existing program the influence of monetary policy diminishes, exposing financial markets to the wrath of fear with no controlling body able to stop it.

Ironic that this would come from a firm that became so blinded by its own greed only to be burnt severely in the midst of the Financial Crisis and subsequently saved from the shame of bankruptcy by the Bank of America who found themselves forced rather than considered to act. One would've thought the painful lesson taught during this close encounter should have reinforced the idea that caution might be the best approach when evidence shows the counter to your beliefs.

Merrill: Long pause healthy for bull market https://t.co/OAcCpAul5W via @CNBCPro

— CNBC (@CNBC) June 8, 2016