Markets tumble despite “powerful” Fed action

Markets fell sharply on Monday.

The S&P 500 fell 2.9 percent and the STOXX Europe 600 sank 4.3 percent.

Earlier in Asia, the Shanghai Composite tumbled 3.1 percent and the BSE Sensex plunged 13.2 percent but the Nikkei 225 rose 2.0 percent.

Markets fell despite the Federal Reserve launching yet more measures to mitigate the impact of the COVID-19 pandemic. It announced on Monday that it would purchase an unlimited amount of Treasuries and mortgage-backed securities, as needed, to support smooth market functioning and effective transmission of monetary policy. It also launched and expanded several emergency lending facilities to prop up markets for corporate credit, municipal debt and asset-backed securities.

Oliver Blackbourn, multi-asset portfolio manager at Janus Henderson, said that while the latest Fed action “sends a powerful signal to markets”, it also “felt like it could be the final policy move from a central bank that now has few cards left to play by itself”.

Still, James Sullivan, head of Asia ex-Japan equity research at JP Morgan, said that this could be “one of the sharpest, but also on our numbers at least, one of the shortest global downturns that we’ve seen in the history of markets”.

“We would be selectively adding to exposure here,” he said.

Similarly, hedge-fund manager David Tepper said that it might be “time to buy a little”. Although stocks could still fall by another 10 to 15 percent, they “look really interesting for the long term”.

In contrast, Scott Minerd, global chief investment officer at Guggenheim Partners, said that “‘buying the dip’ on the expectation that Congress is going to pass something soon is probably not a prudent investment strategy”.

Anthony Scaramucci, founder and managing partner at investing firm SkyBridge, told CNBC that while an economic stimulus package could provide a short term boost for markets, he is less optimistic for the long term.

“We’re in a protracted bear market,” Scaramucci said. “I’ve told people, this is so much worse than the global financial crisis. It’s literally 9/11 plus the global financial crisis.”