When the Federal Reserve cut interest rates by 50 basis points, the market responded positively. But in the weeks that followed, stocks resumed its fall. It decided to take the COVID-19 spread narrative as an excuse to continue selling stocks. The Fed overstepped its core competency. The Fed repeated the error when it cut rates by 100 basis points on Sunday, March 15.
The same happened with the European Central Bank, which pledged to inject money into the markets and set loose interest rate policies.
The world is recognizing the economic impact COVID-19 containment will have on the economy. There is hope, though. South Korea and Singapore showed signs of containing the virus. China did so, too. It also signaled a cautious return to business by opening offices and allowing for travel.
Italy’s lockdown is necessary and long. When this ends in April, tourism will flourish again. The central banks can do nothing, other than ease debt obligations and cut the cost of servicing them.
Sadly, the World Health Organization had to categorize the virus as a pandemic, after realizing many countries did not take the containment requirements seriously. Governments around the world will need to increase spending on COVID-19 tests. And until the global count of fatalities and infections end, the stock market will be at the mercy of the virus.
