Source: https://www.linkedin.com/feed/update/urn%3Ali%3Ashare%3A6640687187392282624
Why the stock market isn’t cheering the #Fed’s surprise #interest-#rate cut: #Monetary #policy has limited ability to counter the #supply #shock investors fear as coronavirus continues to spread: It signals to investors “that #policy makers are grasping significant uncertainty and rapidly mounting downside #risks…” There is also the longstanding question of how effective #monetary #stimulus, and even some forms of #fiscal #stimulus, can be in the face of what is likely to be a “#supply #shock” — the type of economic hit caused by the absence of goods and services with factory shutdowns and curtailed transportation and travel. Monetary and fiscal stimulus typically help mitigate #demand #shocks, which are sharp cutbacks in spending by households, businesses or governments. “A supply shock to the economy isn’t helped by global rates right now…” it may spill over into a demand shock as well. While last week’s lurch lower saw major indexes tumble from recent records to correction territory, investors had looked past slowing #earnings #growth, deteriorating #revenue #growth, margin compression and signs of moderating #economic #growth over the past year-and-a-half.
