We find this confusing: how is the Fed owning bonds either a bullish or bearish case? It merely confirms that capitalism is now dead, that we have centrally-planned, "fake markets" as Bank of America put it, and which as Deutsche Bank further clarified, "these are administered markets and market outcomes will be dictated by the policy goals of the Fed and Treasury, and the tools they select to implement policy."
That bulls are taking this fact as an affront, simply shows just how vested they too are in perpetuating a myth that markets still exist (as if it is somehow the imploding economy and not the Fed's $4 trillion in liquidity injections since March that has boosted the stock market) while pretending they have some idea of what happens next based on "fundamentals" or "data" when in reality the only thing that matters is how much liquidity the Fed injects on any given day, making strategists, analysts and "paywalled pundits" irrelevant (an outcome which is devastating to their financial health).
In any case, shortly after our article, the Fed apologists scrambled to write articles such as this one whose sole counterarguments are outright obtuse: the amount of bankrupt bonds held by the Fed is so small so please don't worry, and in any event, the ETFs will likely sell them.
First of all, anyone who claims to "know" what the ETFs will do with the defaulted bonds likely has a barrel of snake oil they need offloaded with immediate delivery, and their motives should be closely scrutinized from now on. As we explicitly said in our article, it is most certainly the case that the Fed will seek to offload its exposure - similar to what the ECB did when it ended up holding bonds of bankrupt Steinhoff but not before sparking a major scandal in financial cricles - after all the last thing Powell needs is another Congressional hearing inquiring how the Fed buying junk bonds - and junk bonds from massively levered, defaulted zombie corporations at that - is helping US workers. If anything, this merely cements our core argument that the process of rushing to buy corporate bonds was a panicked scramble meant to preserve confidence in a bursting asset bubble, one that was rushed from the beginning without almost any thought as to the consequences.