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Stock market commentary March 16 2020

US stock market tumbles, global stocks are down today

The Fed took a bold decision yesterday, cutting interest rates and starting a QE program. Was it the right decision for the stock market and the economy? Today at the open of the US stock market trading session circuit breakers were activated, to prevent further losses for Dow, S&P 500 and Nasdaq. Dow plunged 12%, over 2750 points. As of 11:53 AM, Monday, March 16, 2020, Eastern Time (ET) the major stock indices recover:

S&P 500: 2,520.72,-190.30(-7.02%)
Dow 30: 21,383.36,-1,802.26(-7.77%)
Nasdaq: 7,323.84,-551.03(-7.00%)
Russell 2000: 1,107.29,-102.84(-8.50%)

Bonds have a rally

10-Yr Bond : 0.85,-0.101(-10.6204%), with a daily range of 0.7290 – 0.8590
Vix: 76.04,+18.21(+31.49%)

Fed and the stock market

We are not journalists but financial analysts. Our financial analysis opinion is that Fed took a decision that can be judged, but it seems to be a correct one. Yes it spooked the global financial markets as the 100 basis points rate cut iare very rare, and now it is very hard to imagine that rates in the US economy can go below zero. So the Fed may have exhausted its monetary policy for now, but it can increase further the QE program after monitoring the economic developments. We consider the decision a right one, as the Fed most probably realized that it is better to create an initial shock of a large magnitude, so as to avoid any delays and provide cheap money to boost the current economic and business conditions. Yes stocks plunge today, and volatility should be present for several days in the stock market and other financial markets. We are not in favor of any bottom fishing for stocks as it is still too risky and we favor defensive sectors, Consumer Defensive, Healthcare, and Utilities.  Also stocks that offer a high-dividend yield, and have a beta of less than 1.0.

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