We’re Down 11%. What Now?
Itās day six of the Great Correction. Thereās blood in the streets, and my roboadvisor isnāt answering the phone!
Investors are pleading with the āplunge protection team,ā (i.e. the Federal Reserve) to issue more accommodative statements and lower interest rates, but remember, this is still only a correction (down 10% gradually), not a crash (down 10% in one session)!
The decisions of certain key market actors over the next few days could define stock prices for the next few years. Itās about the listed companies themselves: sentiment within, and sentiment without.
Most are racing to lower investorsā expectations ahead of a virus-hit earnings season, and that’s doing markets no good at all. Everything falls to Fed Chair Jerome Powell to promptĀ investment, notĀ divestment from those market-moving blue-chips. However, White House heckles are getting louder, and heās caught in a double bind.
If he does nothing, heās ānot done his job.ā If he does something, he legitimizes the wretched excess that arguably compounded this sell-off, and he gets involved historically early in a correction. Jump-starting confidence might not even work. This is a supply shock, and the coronavirus aināt slowing down with more non-Chinese infectants than Chinese.
According to the Fed Funds Futures market, traders are placing their chips on a jaw-dropping 90% chance of three rate cuts. That would leave Powell pretty much out of ammunition, so his response to that market request will be very interesting. We’ll bring it to you!
