There is only one situation where the stock market will react tepidly to the central bank's loose policy, that is, the market is worried that the central bank's excessively loose policy may induce inflation. But if central banks implement policies that are too loose, investors will shift from bonds to stocks as unexpected inflation hurts fixed-income assets more.
Financial market reactions to economic data releases are not random but can be predicted through economic analysis . Strong economic growth will inevitably raise interest rates, but its impact on stock prices is uncertain. This is especially true at the end of the economic expansion period, because there is a game between rising interest rates and rising stock market profits. High inflation is bad news for both stocks and bonds. The expansionary policies of the central bank are definitely good for stocks. Most of the major bull markets in history (in the United States) have the shadow of the expansionary policies of the central bank.
While it is refreshing to be able to observe and understand the short-term reactions of the market, planning an investment strategy based on these short-term data is no easy task and is best left to speculators who can withstand short-term market fluctuations. For most investors, calm observation and persistence in implementing a long-term investment strategy may be the best choice.
