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Central banks to the rescue?
Good luck with that.
The U.S. Federal Reserve tried to swoop in and save the market panic with a 50-basis-point cut on Tuesday. But lowering rates, even a "concerted" lowering of rates by several central banks working together, in the face of already low rates, isn't going to be economically stimulative.
Central banks lowering rates now is like opening the barn door after the horses have already bolted.
Lower rates aren't going to get consumers out if they're scared to go out – or if they can't go out. They aren't going to induce capital spending by companies if companies don't know where demand will come from or when it will come back.
Besides, the flight-to-quality trading that's driven hundreds of billions of dollars into U.S. Treasuries, for example, has already lowered rates dramatically.
When the coast is clear and the coronavirus is behind us, central banks will have to start pulling back the stimulus they intend to flood economies with. Markets know that's the other side of lowering rates in an eventually passing crisis.
So no, lowering rates isn't going to put a hard and fast support under weak markets.
Markets are looking at economies and sales and revenue and earnings and profits… and now losses. Those economic realities are reflected in stock prices.
We're not out of the woods yet. But this will tell us when we are… Full Story