After attempting a strong rebound on Friday, where equities climbed nearly 10%, markets gave back all those gains and more, to fall below the lows of Friday after the Federal Reserve initiated a massive monetary stimulus campaign and cut interest rates yet again, to curtail declining economic growth surrounding the coronavirus outbreak.
The S&P 500 plummeted over 345 or 12.8% from its high Friday before finding a temporary low, while the Dow Jones Industrial Average fell almost 3000 points, or 13% from its close on Friday before bouncing. The Nasdaq Composite tanked a similar percentage. The major averages have since bounced from their lows are attempting to stabilize amid skyrocketing volatility and rampant fear,
“The Fed blasted its monetary bazooka for sure,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. “This better work because I don’t know what they have left, and no amount of money raining from the sky will cure this virus. Only time and medicine will.”
A Tax Break Implied?
In coordination with news releases implying the White House is readying for a tax break for consumers and a bailout for the airline industry, the Fed’s decision, made some investors more optimistic on the market, however, potentially driving markets off lows.
The Fed slashed interest rates down to virtually zero, or their lowest level since 2015, which had held since the depths of the financial crisis. The U.S. central bank also embarked on a massive $700 billion quantitative easing program. President Trump said he was “very happy” with the announcement, adding: “I think that people in the markets should be very thrilled.”
“This, coupled with an important fiscal package, should help cushion the economic downside from the virus’ effect on economic activity,” said Quincy Krosby, chief market strategist at Prudential Financial. “It’s going to be positive, but the market is at the mercy of the virus and at the mercy of whether the containment policies work.”
Investors who are more optimistic about market prospects after the rate cuts and stimulus plans might consider ETFs like the Vanguard Total Stock Market ETF (VTI) or the Vanguard High Dividend Yield ETF (VYM), which offer better dividends than current interest rates as well as access to the broad market.
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