Evening all.
Today didn’t end up being the day for the markets it could have been, after the US Senate failed to agree a stimulus deal.
Markets started heavy this morning as this deal, which was initially voted on Sunday night was unsuccessful but hopes that issues could be overcome between Republicans and Democrats was elevated for a second vote today.
So the markets were not looking all that happy but then an emergency meeting by the Federal Reserve resulted in new QE measures and an ‘unlimited’ commitment to keep credit markets functioning properly.
The SP500 spiked over 7% on this unprecedented news, which actually goes beyond the measures the FED took during the GFC.
Unfortunately, within 3 hours the SP500 was below levels prior to the announcement on news the stimulus bill before the Senate was not making progress.
So while there was a big disappointment to markets I think the structurally, the FED’s new program will be quite powerful and we should remember that they also announced other stimulus recently.
I think this was reflected in the VIX, which I noticed slumped from its recent high around 72 to under 50. (VXJ20) That’s quite a move and could be a good sign for future market dynamics if it can continue to settle.
I don’t think there’s any doubt that a deal will be reached, but the delay is damaging market confidence. So far nothing has managed to keep the markets up for long so it remains to be seen how effective it will be when is does finally get through.
But I think that getting all these measures in place is crucial and when they are eventually followed by something positive about the virus infections starting to fall, or therapies being approved, we’ll actually see the markets move in a way that could be sustainable.
The question regarding how long that will take remains unanswered though.
Thanks for your time.
$SPX500 $DJ30 $NSDQ100
