Market Is Already Pricing In Another Fed Rate Cut, Should You Be Long On Gold, Bitcoin?
- Stock market plunges today as well, Deutsche Bank says it “has further to go”
- As fear of global covid-19 pandemic continues to grip the world, the 10-year Treasury drops to record low to 0.667%
- “Everything is on the table and we are willing to do more,” – St Louis Federal bank president James Bullard
- Global stocks are extending their slump on Friday
The fear of a global recession triggered by coronavirus has sent stocks plunging yet again with the Dow Jones down 2.3%, the S&P 500 losing 3%, and Nasdaq sliding by 3.3%.
However, according to Deutsche Bank, there is no rest for the exhausted investors as today the bank released a grim analysis where it states that the S&P 500 has already lost 13% to last Friday's closing low “has further to go.” The bank said,
“Our baseline view is for a total sell off from the last peak of 15-20%, with a bottom some time in Q2. We do view the impacts on macro and earnings growth as being relatively short-lived and the market eventually looking through them and maintaining our year-end target of 3250 for the S&P 500.”
— Bubble Boy (@IncomeDisparity) March 6, 2020
Treasuries yield hits record low
The investors are meanwhile propping up gold prices amidst a flight to safety move. Gold is up 1.03% at $1,685.20 an ounce. Another traditional safe-haven asset Treasury is seeing the demand which led the yield, on 10-year Treasury to drop to its yet another low 0.667% at one point today.
As fears of global covid-19 pandemic grips the world, the benchmark 10-year notes hit an all-time low after the Federal Reserve's emergency rate cut sent it below 1% for the first time ever. John Taylor, a money manager at AllianceBernstein said,
“What we are seeing is symptomatic of not enough positive yielding, defensive assets within global fixed income.”
“Central banks are doing everything they can to provide stimulus, which can add fuel to the flames of the bond rally.”
The five-year Treasury yield also dropped to a record low 0.5339%, breaching the 2012 low. The 30-year rate has plunged to 1.2742%, also a record low.
Get ready for more stimulus
The market is now again pricing in for another rate cut. Chris Jeffery, head of rates and inflation at Legal & General Investment Management said,
“The market’s focus is squarely on the growing likelihood of the Fed once again hitting the zero lower bound on short-term interest rates and restarting quantitative easing.”
“With the number of coronavirus cases spiraling higher every day, it’s a brave investor who stands in front of that trend.”
Market is now pricing in a 75bps(!) cut on March 18th. That's 1.25% over a two week period. Insanity right now. pic.twitter.com/PaKT5uIvE0
— Ceteris Paribus (@ceterispar1bus) March 6, 2020
Commenting on Fed’s monetary policy actions against the deadly virus, St Louis Federal bank president James Bullard said, “everything is on the table and we are willing to do more.”
So… when they've cut down to 0 interest rate 70 days from now and the coronavirus still exists, then what? https://t.co/fXX674VLFG
— The Wolf Of All Streets (@scottmelker) March 5, 2020
And once the rate goes below zero which isn't too far off, the central bank would turn to more QE and printing where “the poor will pay a far greater price than the rich,” said trader Scott Melker. Crypto trader Joe McCann said,
The market is already pricing in 𝘢𝘯𝘰𝘵𝘩𝘦𝘳 Fed rate cut in a couple of weeks.
80% chance according to futures markets.
— Joe McCann (@joemccann) March 5, 2020