This is ridiculous.
The topic of the thread — income inequality — is very important but has nothing to do with thread title: “Stock Markets, Tariffs, Coronavirus.”
Many errors are being spouted but I, for one, am not going to respond to off-topic posts here.
***PLEASE: ***Ask Mods to close the thread and start a new one with a title that matches the discussion.
I was a manufacturer’s rep for a long time. Although I can see how you might’ve gotten that idea, I did not intend to imply that any manufacturer took excessive profits. And I’m not one of those people that thinks “profit” is a bad word.
My supposition about the manufacturers raising prices to cover tariffs then not lowering them when the tariffs go away was based on a conversation I had with some manufacturing executives, who intend to do just that.
The theory being that any damage to business imposed by the higher prices happens when the prices are raised. Lowering them a year later doesn’t get you anything back, so why do it? So maybe their 5 percent profit is now 5.5 percent.
The Fed cut rates a full 50 basis points this morning, the first emergency rate cut since 2008.
The markets, knowing that (a) this was a move designed to appease Dotard and (b) that a rate cut isn’t going to make up for lost manufacturing in China, promptly dropped 500 points upon the announcement, and is now down around 850 points from this morning’s high (it was up about 200 points before the news hit), currently at -380 from yesterday’s close.
Lowering prices can mean increase in market share. Most companies like market share so that is why they would lower prices once the tariffs go away.
However if they know that their price cut will be met by similar price cuts by their competitors, keeping market share more or less the same with lower profits, why do it?
Price cuts due to manufacturing efficiency are one thing - that can’t be met by competitors. Price cuts anyone can do are another.
The Times noted that the rally after the Fed cut lasted 15 minutes. The Dow is down over 800 points (3%) from yesterday’s close almost at the bell. At bond yields are now below 1%, which means not much room for stimulus.
Hope Trump is happy with the reaction to the cut he wanted.
After the 50 point cut, markets reacted by dropping over 1,000 points from the days’ high (27,040) to close at 25,969, a -1,071 point drop. Compared to the previous close, it’s ‘only’ down 786, but the reaction to the rate hike… nearly blasting away all of Monday’s gains… will be causing a lot of sleepless nights in DC.
Agreed. So far, Trump’s only positive accomplishment is the surging stock market. If stocks are down in November, he doesn’t stand a chance at re-election.
For the first time in a long time, I’m optimistic about the Democratic party.
The stocks won’t do it. Being in a recession will, and one analyst said the bond market has priced in a 90% chance of a recession.
Again, to Bloomberg’s point, the markets are finally pricing in the incompetence of the Trump Administration. The reaction to the rate drop isthe stongest signal yet that financial experts have no faith in this Administration anymore.
The ‘lying to ourselves’ phase of the so-called “Trump rally” are over. It feels like 2007 all over again.
I’m involved in technical conference under IEEE. A big one in my field, in Europe, that was to be held next week just got canceled. I saw mail from IEEE to conference organizers say what procedures should be followed to qualify for insurance reimbursement. But any penalties a conference pays to a hotel is not going to make up for the mass of empty rooms and empty restaurants and reduction in catering.
Our conference is in November, thank Og, and we aren’t even at the paper submission deadline date yet. It will be interesting to see what we get.
I agree that Powell saw this as an opportune time to shut the Mango Moghul’s fat mouth, but I don’t think the markets necessarily saw it as pressure, and even if they did, I don’t think the markets would react negatively to a rate cute per se.
It seems that instead the market wondered what the Fed knew that the CDC didn’t, and it’s still jittery over the longer-term after shocks of COVID-19. China, Inc won’t just restart overnight. And in all likelihood, the market won’t start seeing the impact of the supply chain until later this month.
So…
Tuesday: Fed drops funding rate by 50 basis points, markets plummet 1,000 points because “wrong response!”
Wednesday: Markets rise 1,000 points because traders learn Joe Biden is now more likely to be our next President
Thursday: Markets fall 1,000 points as traders realize Donald Trump is still President
Markets dropped because they’re beginning to realize that lowering interest rates isn’t going to solve the immediate problem, which is that consumers are staying home, which in turn means they’re also laying themselves off from their jobs. Investors know that the markets aren’t able to quantify this problem and won’t be able to until it stops the spread of corona. Until corona stops spreading, the markets are going to continue to freak out. There will be up days - there were up days during the great recession.
I don’t think the markets dropped then because of the virus, per se, but because they wondered if the emergency cut was due to the Fed knowing some weaknesses in the economy that they didn’t.
Then the Biden Boom got replaced by the Trump Trough.
I hereby give up trying to understand the market:
“China’s stock market has risen 10 per cent in the last month”
[Coronavirus: China could become new investment safe haven as stocks, yuan rally while global markets suffer | South China Morning Post](I hereby give up trying to understand the market: “China’s stock market has risen 10 per cent in the last month” Coronavirus: China could become new investment safe haven as stocks, yuan rally while global markets suffer | South China Morning Post)
The markets are betting the China’s household savings and central bank stimulus will get them through the crisis. They also probably assume that while the rest of the world is just now waking up to COVID, China’s government’s ‘got this’…uh huh.
Chinese investors will soon wake up to another reality: the rest of the world is going to be a lot less confident about using China as part of their supply chain, and China’s government is still lying to people about their response to COVID, which among other things allows the police to incarcerate people for simply going public with their own COVID infections. Sorry, but you can’t be a transparent (okay, not so transparent), global market economic power on one hand and not share critical information about pandemics on the other.
Nah, they dropped because they’re worried that economic activity is going to grind to a halt. Worse, they’re not sure how many Americans can withstand not working and not getting paid for several weeks.
Beyond that, they’re also not convinced that the Fed is really ready to jump and intervene with policies that are going to respond to this shock event. Rate cuts will boost lending, but that’s not what people will need - we’ll need stimulus and money in the hands of households, and we’ll need lenders to have some flexibility in dealing with people who fall behind on their bills. The initial Fed response doesn’t seem to be taking that into consideration.
They knew that before the Fed cut. And the Fed eventually cutting interest rates was already priced in, being no big surprise. The shock was the emergency cut.
One town around here is on the verge of passing legislation forbidding landlords from evicting people if they fall behind on rent due to the virus. That’s the kind of thing we need, but I don’t think the Fed can do such things, even mandating loan extensions or stuff like that.
Some of the drop is due to the realization that the Fed can’t fix supply chain problems, only demand problems, and that people having more money is not going to get them on planes or cruise ships in the present circumstances.
The combined effect of Italy’s (northern) lockdown on the larger European economy (much greater than I realized), OPEC’s meltdown (and the subsequent effect on US production), and the spectre more generally of a galloping virus pandemic, has led toDow futures being down 900 points and oil off by 20%.