There was no liquidity issue in the first place as the repo rate didn’t shoot through the roof. Therefore, increasing the repo funding doesn’t help much and won’t stop the stock market from crashing.
Trump had also announced some fiscal policies but the stock markets still crashed.
We had stated that using monetary and fiscal policies won't do much to resolve a medical healthcare crisis. However, the ensuing outcome of a medical healthcare crisis is a financial crisis. Thus, if we can contain and resolve the virus outbreak, we don't have to worry much about the financial crisis later.
I don't see any way out for the US now except to wait it out. Hopefully, a vaccine will be produced soon. As usual, the US will restart its quantitative easing (QE) programme and keep its interest rates low to continue to pump money into the financial system and this will create an even bigger financial crisis in the future.
We had stated before how the QE affected the world using HK and SG as examples.
The investors such as fund managers are badly burnt this time because they have underestimated the covid-19 outbreak. Why?
Let's take a look at 10-year yield first.
The 10-year yield (risk-free rate) is rebounding from its recent record low of about 0.30%. In other words, the bond price is plunging now. This doesn't auger well for the financial markets because this is the signal that the bond investors are cashing out to cover their losses in stocks and commodities.
The gold prices have also fallen from US$1700 to US$1500++ now. (The investors are cashing out.)
Bitcoin prices have also fallen to US$5000 now. (The investors are cashing out.)
No market is spared from this bloodbath and this just shows how badly the investors are hurt by this malaise.
4 comments:
I've been buying big this past week & probably continue over next 2 months. Best sales since 2008/2009! Maybe another 10% or 15% lower ... even better sales!
https://sg.news.yahoo.com/mike-pence-trump-coronavirus-tests-anthony-fauci-003932311.html
The US is still trying to cover up the true situation. Sigh!
Dear Unknown,
You've been buying since mid-Feb before the US stock market crashes.
I'm worried for you now. Just don't over-leveraged so that you can live to fight another day.
Feb is more of China & HK stocks. Now is more of US stocks.
No debts, no loans, emergency funds of 1 year expenses, still sizeable amount of spare investing cash to deploy. Oh and I've been jobless for 12 years already.
I've been hearing the doom & gloomers since 1998 Asian financial crisis till today's covid19, trade wars, and $4 trillion of soon-to-be-junk BBB corporate debts that will crush the global capitalist system 100X worse than GFC.....
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