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First, there was the Powell Put, the conviction of Wall Street and investors that the Federal Reserve would ride to the rescue to support stock prices if financial markets or the economy threatened to tumble. The existence of a Powell Put didn’t seem arguable as the Fed cut its benchmark interest rates to 0% and then intervened in the markets to buy Treasuries, short-term money market and commercial paper, corporate bonds, muni bonds … Pretty much any asset where the central bank saw a threat to market liquidity. Who can blame investors and traders from using that flood of Fed cash to buy up stocks? (Who would want to actually invest in the economy?) And who would worry all that much about buying risky assets since the Fed had their backs?

Especially since last week Fed chair Powell said that even if inflation were to temporarily pop to the above the central bank’s 2% inflation target, the Fed wouldn’t be in any rush to raise interest rates. Wall Street’s opinion is that means near 0% benchmark interest rates from the Fed until 2025. (Not that there’s a hint of runaway inflation. The Personal Consumption Expenditures index for inflation, the Fed’s preferred measure, rose by just 1% in July from that month in 2019.)

The Fed Put has been one of the causes behind the recovery in the market indexes from the March lows and the continued advance of stocks like Microsoft, Amazon, Apple and the rest of the big technology companies. With money flowing into the indexes, these stocks that dominate the indexes have continued to climb–and as they climb they’ve taken the indexes with them leading more money to flow into indexes. In a normal market today’s action (September 1) would be raising fears to a blow off top in the rally. Apple (AAPL) added another 3.98%. Amazon (AMZN) was up 1.40%.

But in this market? The CBOE S&P 500 Volatility index actually dropped 1.1% showing a slight drop in demand for risk hedges.

And then, of course, there’s the second Put, the Vaccine Put, which prevents bad economic news from gaining much traction and lets individual stocks shake off company-specific negative news. The Put works like this: With a successful vaccine for the coronavirus just months away–maybe by the November election the Trump administration keeps saying but certainly by early 2021 all the optimists agree-all the bad news about the effects of the virus on the economy is set to vanish. Sell off on evidence the economy is slowing now and in the third quarter ahead? Not to bother since by 2021 the economy will be–if not booming–at least growing again. Punish a stock because as with Disney (DIS) second quarter theme park plunged–and theme parks are the most profitable part of the company’s business? Nah, let’s send the stock up 10% instead because a vaccine will mean theme park revenue will return and in the meanwhile did you see how the coronavirus has pushed Disney’s streaming service so far ahead of projections?

The Vaccine Put also serves to reinforce the Powell Put. If the economy or the market starts to falter, just remember that investors and traders are about to see a steady steam of good news from one drug company’s vaccine trials or another over the next few months. Each bit of vaccine good news is another excuse for stocks to move ahead on the day.

The ultimate news from the vaccine trials will be a negative for most drug companies–since there will be a limited number of winners in the vaccine race–but in the meantime you know the saying “Buy the rumor; sell the fact.”

If my observation is correct-and there is a Vaccine Put–then there are two questions that need an answer.

First, what could possibly go wrong to damage or destroy the Vaccine Put?

Second, what should you do–what can you do–to protect your portfolio from a scenario that damages the Vaccine Put?

I’ll answer those two questions in posts tomorrow.