“Fed’s urgent decision to cut rates by 50 basis point” by Blackfort CIO Dr. Andreas Bickel

The Fed has reduced in an emergency decision the federal-funds rate by 50 basis point. This is the first-rate change in between scheduled Fed policy meetings since the 2008 financial crisis.

Equity markets went crazy, first a spike up only to be followed by further downside. Market watchers are puzzled. This intervention was supposed to calm down the situation, but it increases the fear among investors.

Meanwhile, today’s European PMI data were strong, but probably meaningless as the survey was done mostly before the crisis dominated the news flow.

Don’t just buy the dip (yet). But sell volatility to build up positions. Real assets haven’t lost much such as European REITs or gold and might still be a good place to park money.

A think experiment becomes reality: Helicopter money is distributed in Hong Kong, Macau and Singapore to stimulate the economy! Expect more unconventional stimulus.

Last but not least, we do not know how severe the impact of the pandemia will be. But we do see that in China the number of new infected is decreasing, the number of cured patients is outnumbering the new infected. China has cut tariffs, increased the fiscal stimulus and has a very accommodative monetary poly stance. Probably Asian equities will outpace the US.

Source: LinkedIn

Published: 04/03/20 by Blackfort CIO Dr. Andreas Bickel

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