On Friday morning, with stocks resuming their historic plunge, we said that across Wall Street, there was just one question: “Will The Fed Activate A Coordinated Central Bank Bailout On Sunday.” And indeed, just a few hours later, the Fed Chair did in fact publish an unscheduled statement in an attempy to calm crashing markets:
The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity. The Federal Reserve is closely monitoring developments and their implications for the economic outlook. We will use our tools and act as appropriate to support the economy.
Unfortunately for the bulls who got steamrolled by last week’s record drop from a record high, this statement wasn’t sufficient to assure them that the Fed would indeed do “whatever it takes” to stem the bleeding. Commenting on Powell’s attempt to ease nerves, JPMorgan’s chief economist Michael Feroli said that the “statement took a page of out Greenspan’s playbook in responding to Black Monday, reminding markets that the Fed is on the job and ready to respond. This may have been particularly necessary since Fed rhetoric this week sounded somewhat unresponsive to the changing situation. Unlike Black Monday, however, the economic fundamentals may truly be changing” according to Feroli, which is ironic because just last week JPM’s head quant, Marko Kolanovic, tripled down on his bullish view of the market. Perhaps he was too concerned as being seen as wrong, than accounting for the “changing economic fundamentals”..?
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