We’re Down 11%. What Now? 😳

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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 ā€œplunge 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. 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 promptĀ investment, notĀ 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 ā€œnot 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 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!

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