Why the Fed’s Cure for Coronavirus Isn’t Working

Yesterday evening, the Federal Reserve made its second emergency announcement this month. Rather than meet tomorrow and Wednesday, as planned, the Fed made a surprise decision over the weekend, and announced:

  • A cut to interest rates by a full percentage point, down to 0% to 0.25%.
  • A resumption of quantitative easing, with the bank beginning to buy at least $700 billion of assets.
  • And a reduction of reserve requirements to 0%.

If the emergency rate 0.5% rate cut from two weeks ago was the Fed firing the howitzer, this was nothing short of a nuke.

This One Factor Will Determine the Fate of the Market

On Wednesday afternoon, the World Health Organization (WHO) finally made official what we have known for quite a while:

The coronavirus outbreak is now a “pandemic,” meaning an epidemic with widespread outbreaks across the globe.

Soon after, the Dow, NASDAQ, and S&P 500 all entered a bear market, meaning they were now down at least 20% off their all-time highs.

And Thursday saw the biggest down day in the Markets since Black Monday in October of 1987.

And even as China’s fight with the coronavirus seems to be transitioning from containment to recovery, things are only getting started in Europe and here in America.

The opportunity to stop, or at least quickly contain, the disease has long since passed. We’re now at the point of managing the extent of the outbreak that’s already upon us.

So what’s the one question?

Will the U.S. end up being more like Italy, with uncontained growth of the virus and an overwhelmed healthcare system, or like Singapore, Taiwan, even South Korea, who have limited the spread of the disease?

The biggest Reality Gap right now exists between the number of U.S. confirmed cases and how many people are really infected. The information needed to close that gap will become clear this coming week.

And here’s exactly how to play it