The bull market is 11 years old on Monday, and it is the longest stretch of non stop gains ever. The sell off over the past 12 trading days means that the US stocks are on the edge of a bear market. Therefore; Tuesday will be a test.
If the market goes below 20%, the bull market will officially be over, and we are entering a bear market. After the Great Recession, the bull market started in March 2009. The S&P 500 has gone straight up since then.
The S&P 500 is up 339% and it has been a slow recovery. It`s similar to the recovery from the Great Depression in June 1932 were the S&P 500 skyrocketed 325%. At that time, it was the deepest recession in modern American history.
President Franklin Roosevelt supported the bull market with massive government spending. Later on, Roosevelt pulled back from the program and the Fed tightened its reserve ratios for banks. The economy didn`t recover as much as it should, and tighter monetary and fiscal policy led to a double-dip recession.
This is why the Fed is important now. So are the Trump administration. The Fed cut the rates 50 points only days ago and they will probably come up with more news about the market even this week.
The Fed offers Repo Market $50 Billion more to ease rate pressure. New York Fed Repo Totals $112,93 Billion and Fed`s move to tap liquidity operations will buy time on more rate cuts.
What they do now is great leadership on the world stage. They can`t stop the virus but they can make liquidity.
To contact the author of this story: Ket Garden at post@shinybull.com
