With global financial markets in full panic mode over the coronavirus, a lot of analysts are speculating that central banks worldwide will start reacting this spring. So far, only the People’s Bank of China (PBoC) has eased monetary policy, but everyone else is waiting.
What about the Federal Reserve?
A lot of Fed officials have come out in recent weeks, discouraging investors from pricing in a rate cut. Fed Chair Jerome Powell has also hinted that a cut to interest rates is not happening anytime soon unless there was a significant economic event.
White House chief economic adviser Larry Kudlow is not holding his breath on easing.
“I’m not hearing the Fed’s going to make any panic move,” he told CNBC.
“Apart from the virus, I have said I wouldn’t mind seeing my friends at the Fed be a little bolder in their target rate and their balance sheet. I said that before the virus, that’s not related to the virus. There will be some stumbles. We’re looking at numbers; it’s a little iffy. But at the moment … there’s no supply disruptions out there yet.”
The stock market has crashed more than 1,500 points in the last few trading sessions, though equities have slightly rebounded midweek. With the coronavirus expanding to more than 30 countries, traders fear that Covid-19 will start affecting global supply chains and hurting the global economic recovery.
But is the stock market correction really the result of the coronavirus?
Jeffrey Gundlach, DoubleLine Capital CEO and Wall Street “bond king,” thinks the rise of Senator Bernie Sanders (I-VT) is doing more damage.
“Maybe this is the dark side of momentum investing (which is exactly what defines ‘passive’),” Gundlach wrote to CNBC. “The market goes down in a knee jerk way on the Bernie rise, but the market going down makes Bernie’s polls go up on his rejection of a market based economy. Which makes the market go down another leg. Rinse and repeat.”
It’s getting crazy out there.
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