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Current Views

Unlimited Quantitative Easing

The Federal Reserve announced a number of actions Monday morning, several of which appear to be unprecedented. Overall, in our view, these are steps in the right direction.

The Federal Reserve expanded its authority to purchase U.S. Treasury and agency mortgage-backed securities in unlimited amounts. The Federal Reserve also added agency corporate mortgage-backed securities to this program, which are loans against multifamily housing units. It similarly broadened its Money Market Liquidity Facility to include more complex municipal debt structures that were not initially covered.

The Federal Reserve also revived the Term Asset-Backed Securities Loan Facility (TALF), a tool it used in the 2008 financial crisis. This facility lends against consumer debt including credit card, auto and student loans, as well as qualified Small Business Administration loans. This will enable banks to continue to lend to consumers, since it knows it can pledge these loans as collateral to the Federal Reserve.

To support the investment grade corporate bond market, the Federal Reserve created two new facilities: one to lend to investment grade corporate borrowers, and another to purchase investment grade corporate bonds and exchange-traded funds that hold those bonds. This is unprecedented. But we know from our own experience at Roosevelt that these markets are not functioning properly. Earlier steps to improve functioning in related fixed income markets were not enough to restore liquidity.

We believe it was appropriate to include exchange-traded funds in this program, since they are an important conduit for liquidity in this market.

We do have concerns that the TALF, corporate bond and ETF facilities may not be enough to stabilize these large markets, and therefore, we believe it is possible the Federal Reserve will have to expand these programs. As a result, we believe it may be necessary for Congress to appropriate more crisis funds for the Treasury to use as it expands these programs.

In Monday morning’s statement, the Federal Reserve alluded to a Main Street Lending facility for small and midsize businesses. We believe this facility, or something like it, will be crucial to mitigating damage to the U.S. economy during the pandemic disruption. In our opinion, such an action is best implemented via the banking system, such as through a Main Street facility, whereby the Fed accepts these loans as collateral with Treasury absorbing the losses. Congress is currently negotiating the size and form of such a package, as one of many items in its $1+ trillion stimulus bill.

The size of any stimulus bill is critical in softening the blow to the economy.  We therefore expect additional Federal Reserve actions in the coming days and weeks, some in conjunction with Treasury, and others possibly by Congress.



This information is intended solely to report on investment strategies and opportunities identified by Roosevelt. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. This material is not intended as an offer or solicitation to buy, hold or sell any financial instrument. References to specific securities and their issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. Please contact us at 646-452-6700 if there is any change in your financial situation, needs, goals or objectives, or if you wish to initiate any restrictions on the management of the account or modify existing restrictions, or if you would like to request a copy of our Code of Ethics. Our current disclosure statement is set forth on our Form ADV Part II, available for your review upon request, and on our website, www.rooseveltinvestments.com.

Past performance is not a guarantee of future results. Indices are unmanaged and cannot accommodate direct investment. Themes assigned as per Roosevelt Investments’ evaluation. Risk tools may include cash or other securities that we believe possess a low or inverse correlation to the overall market.


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The Roosevelt Investment Group, Inc. is an independent investment management firm that is not affiliated with any parent organization. The Roosevelt Investment Group, Inc. manages equity, fixed income, and balanced assets for primarily U.S. clients. The Roosevelt Investment Group, Inc. is an investment adviser registered with the U.S. Securities and Exchange Commission and notice filed in all 50 states.

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