Panic Sell Continues

Panic Sell Continues

Yesterday, the US Federal Reserve made a dramatic move, cutting interest rates by 100 basis points, bringing the rate down to nearly 0%. The official US Dollar interest rate is now set at 0.25%, effectively zero. In addition to the rate cut, the Fed unveiled a $700 billion quantitative easing program, which includes at least $500 billion in US Treasury securities and $200 billion in government mortgage-backed securities.

These unprecedented actions were aimed at easing the panic and stopping the massive sell-offs gripping the market. However, they failed to calm investor fears, with markets reacting negatively. For the second time in recent weeks, trading was halted as stock indices plummeted at market open. Circuit breakers triggered automatically after indices dropped more than 7%, leading to a sharp decline.

The Dow Jones suffered its worst single-day point loss in history, shedding 3,000 points. In percentage terms, the drop of 13% is now the second worst on record. The index is rapidly approaching the 20,000-point threshold, marking a nearly 10,000-point loss for the month.

Despite the Fed’s efforts to incentivize spending by lowering rates, investors are concerned that it won’t be enough to boost the economy. With people being asked to stay at home to curb the spread of the virus, the expected economic activity simply isn’t happening. In fact, the Fed’s drastic measures may have triggered more panic, as it was the largest single-day response the Fed has ever taken, and it was announced ahead of the regular meeting schedule.

Even traditional safe-haven assets like gold are being sold off as investors look to liquidate assets. As the global situation worsens and more countries implement strict quarantine measures, including border closures, it’s clear that the situation is likely to continue spiraling downward. Countries like Canada and New Zealand are enacting stringent measures, including halting foreign travel and mandating self-isolation for travelers.

This rapidly evolving crisis underscores the uncertainty and challenges in the markets as the world adapts to new realities under quarantine and social distancing measures.