No Non Sense News
Today is Monday, March 16 and it is 5 AM.
The Incredible Hulk Roller Coaster at Universal Studios has nothing on current market gymnastics. The following chart shows the daily price fluctuation for the Dow Average since the start of the year.
So everyone is wondering given the size of Friday afternoon’s rally after Trumps press conference, whether the worst is over. Certainly his words helped trigger a massive rally in the final hour of trading. The Dow closed up 1985 points on the day making it the single largest point gain for the Dow average EVER!. But is a 30% peak to trough correction enough to get institutions interested enough to start buying again?
Bottom line: is the market bottom in and we rally with a V shaped recovery never to look back again or is a rally attempt short lived and we retest Thursday’s low?
In the past 10 years, V shaped recoveries have become more of the norm because of the massive FED QE stimulus injected into the financial markets to help stave off further market and economic erosion. This helicopter money, a term coined by Milton Friedman, has typically proven the correct antidote for virtually all economic ailments of late. The Fed’s promise of a $1.5 trillion financial markets injection is nothing more than good old fashioned QE or Helicopter Money in disguise.
In addition, the House has reached a deal with the Trump administration over the weekend on an $8.3 billion fiscal stimulus package to combat the Coronavirus slow down. This legislation expands access to free testing, provides $1 billion in food aid and extends sick leave benefits to vulnerable Americans.
Then late Sunday afternoon, the Fed came out with another surprise rate cut of 100 basis, effectively dropping rates to zero and a new QE program to the tune of $700 billion.
Could this “first of its kind” fiscal program along with new QE and zero percent interest rates, be enough to reverse the slide and start us on the road to recovery? Certainly it would appear they are trying to pull out all the stops to stem the bleeding and calm the panic. The fact that both sides came together during this moment of need may be a signal that the partisan divide and fiscal deep freeze is beginning to thaw. And it couldn’t come at a better time.
No one can say with absolute certainty whether the combination of all these actions means we have established a market bottom and will start the recovery process. One thing I can say though is that my guess is that the worst of the market correction may well be over.
I also want to make everyone aware that if they do not wish to travel to our office for account reviews or meetings, we are fully capable of conducting Zoom Teleconferences instead. Practicing an abundance of caution at this time I believe is the best thing we can do. Helicopters to the rescue.
Should anyone have any further questions or just want to talk, please give us a call anytime.
Dow Jones Industrial Average Index
Nasdaq Composite Index
S&P 500 Index