Overview: The Federal Reserve enacted a second round of emergency interest-rate cuts Sunday night March 15, lowering the fed funds rate to a range of 0 – 0.25%. In addition, the Fed announced that they would be buying $700 billion of bonds to shore up liquidity in the financial system. The early reaction to the move by the Fed was mixed. The measures were meant to stabilize jittery financial markets, but also risk adding to investor anxiety. Volatility continues to drive markets as coronavirus headlines dominate. The S&P 500 Index ended last week down 8.7%, while international stocks (MSCI EAFE) fared even worse, down 18.4% for the week. Bond yields were sharply lower, with the 10-year Treasury finishing the week at 0.95%, after trading as low at 0.34% in the first part of the week.
Looking ahead, it is clear that policymakers around the world will need to roll out more monetary and fiscal stimulus to counter the coronavirus pandemic. Here in the U.S., the Fed announcement to cut short interest rates to zero and to expand asset purchases are moves in that direction.
Weekly Returns and Data
Sources: Goldman Sachs Asset Management, Bloomberg
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