June 29, 2020 at 7:37 am #89129
US overnight core CPI in April experienced the sharpest month-on-month decline in history, falling 0.8% after seasonal adjustment to a record low since November, 2008, while core CPI shrank 0.4% annually.To get more news about <b>WikiFX</b>, you can visit wikifx news official website.
Facing the recession caused by the pandemic, US Federal Reserve lowered benchmark interest rate to nearly zero on March 15th, while multiple Fed policymakers noted that the Fed will take all necessary measures to alleviate economic impact of the massive lockdown measures.
Fund managers and economists observe theres little chance the Fed will reduce rate to the negative range, as under negative rate, financial institutions must pay the central bank interest rate on excess reserves – the capital reserves held by the bank or financial institution in excess of what is required by regulators.
In that way, the central bank can push cash-holding institutions into increasing corporate and consumer loans.
The European Central Bank (ECB) introduced negative interest rates earlier in June, 2014, reducing the deposit interest rate to -0.1% to revive economy. The Bank of Japan (BOJ) implemented negative interest rates in January, 2016, mainly to prevent the yen ‘s unpopular appreciation from damaging the country’s export-dependent economy.
Lastly, the market has done well because many of the most valuable companies in the index have been shielded or actually even benefitted from the crisis.
Charles Schwab strategist Liz Ann Sonders notes that more than half of the value of the S&P 500 comes from companies in the tech, healthcare, and communications services industries. These companies have done fine or even well in the past few months.The so-called “FANG+” companies, moreover — Facebook, Amazon, Netflix, Google, Microsoft, and other Internet giants — make up a bigger percentage of the market than ever before. And they have collectively risen.So, in short, for now, the reason the stock market is rising is that some investors believe we’ve seen the worst of the impact and that the situation will improve from here.Other investors, meanwhile, think there’s more bad news to come and that those hoping for a quick recovery will be disappointed. The most famous investor on the planet, Warren Buffett, appears to be in this camp.
Which investors are right？We’ll see. No one has a crystal ball, and the endless challenge of trying to predict the future better than other investors is one reason the stock market is so fascinating.In the meantime, our sympathies to the tens of millions of Americans who have lost their jobs in this crisis. We all hope that the optimists are right, that the worst is over, and that we can rebuild our economy quickly from here.A version of this post first appeared in “Insider Today,” a daily email written by Henry Blodget and David Plotz. To receive it in your inbox, please sign up here.
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