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IPFS News Link • Economy - Economics USA

Morgan Stanley: Markets Will Struggle Until The Fed Launches An Official QE Program

• https://www.zerohedge.com, by Tyler Durden

This bear market would play out as a consolidation rather than a wipeout, affecting different stocks and sectors at different times. I later called it a rolling bear market that would leave both bears and bulls unsatisfied.

I always viewed last year's 4Q rally as more about liquidity than fundamentals and thought it could last into April/May when the Fed was scheduled to curtail its latest balance sheet expansion program.  However, the unexpected COVID-19 outbreak has brought that timing forward, and the recent correction in equity markets makes the entire rally since last October look like a false breakout.

Such technical patterns are troubling because they highlight capital that came in late at bad prices, creating overhead resistance around 3100 on the S&P 500. If that signal is right, it suggests that the original consolidation/rolling bear market has unfinished business.

Most investors, economists and market strategists believe the unfortunate outbreak of COVID-19 is a temporary shock to the economy that won't persist much beyond the first half of this year. There's also an expectation that a 2H20 snapback will be aided by fiscal and monetary stimulus, which is already taking place. I would concur.


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