We’re Down 11%. What Now?
It’s day six of the Great Correction. There’s blood in the streets, and my roboadvisor isn’t answering the phone!
Investors are pleading with the “plunge protection team,” (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. It’s about the listed companies themselves: sentiment within, and sentiment without.
Most are racing to lower investors’ 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 prompt investment, not divestment from those market-moving blue-chips. However, White House heckles are getting louder, and he’s caught in a double bind.
If he does nothing, he’s “not done his job.” 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 ain’t 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!