Fed Chairman Speech brings Reality into Perspective

Stocks are getting hammered this morning, as the reality of the dire state of the US economy is slowly being realized.  There has been no significant changes to the fundamentals of the stock market to justify why investors suddenly have a negative outlook.  Anything on the minds of stock investors today should have been top of mind long before.  Given that stock investors have no real logic behind the rally that we have seen the past six weeks, this could be a short term fall.  It is like stock prices have been driven by crack fed zombies.  Nothing has been based on logic.

Federal Reserve Chairman Collin Powell made comments today regarding the state of the US economy.  The highlights of the talk were:

• The path ahead is highly uncertain
• He sees significant downside risk
• Prolonged recession and possible weak recovery if they don’t get relief correct
• Additional relief may be needed (more stimulus to tax payers)
• Liquidity problems could turn into solvency problems
• Pandemic raises longer term concerns
• The Fed will use all available tools to help
• 40% of US households making $40k or less lost their jobs in March
• Negative interest rates are not currently being considered

This very negative outlook is not outside of what most would have expected.  I don’t see the recovery being strong.  I continue to see stock prices falling.  I see more and more potential home buyers getting knocked out of the market.  I see default rates rising as soon as payment forbearance terms expire.  Just a terrible time…

We will maintain a locking bias.