This afternoon, the Federal Reserve took action by lowering the Fed Funds rate to a range of 0%-.25%. Even more importantly, the Fed announced that they would buy up to $500 billion of Treasury Securities and up to $200 billion Mortgage Backed Securities. Now, will any of this stem the tide of fear that is gripping financial markets? That remains to be seen, but if we look back to the financial crisis of 2008-2009, it was December of 2008 when Fed Chair Bernanke announced that the Fed was all in with regards to providing liquidity to the financial markets. At that time, the term quantitative easing became something we would be talking about for years to come.
Well, here we are again. Remember back then, although the Fed had declared war on the financial crisis, it took several months before the effects of Fed action were able to finally settle the markets. After that, of course, we experienced one of the greatest advances in stocks that we have ever seen.
It’s not likely, while fear is dominating the investor psyche, that Fed actions or even actions by Congress are going to placate investors. The unknown (and the outcome of this pandemic is certainly unknown), is a powerful cloud hanging over the markets right now. Medical clarity will likely be the antidote, and that will take time. But, these actions by the Fed and eventually by Congress will help and be more appreciated when investors are not overcome by fear.
We’ll keep you up to date on how things unfold in the morning.
Try to have a nice evening everyone.