On the morning of March 16, Beijing time, in order to alleviate the impact of the new crown epidemic on the US economy, the Fed urgently cut interest rates by 1 percentage point to 0%-0.25%, marking the Fed's entry into the era of "zero interest rates". At the same time, the Fed announced that it would increase its bond holdings by $700 billion, which means that the Fed has once again launched quantitative easing.
However, the Fed's interest rate cuts and quantitative easing have caused market concerns. After the emergency interest rate cut, the three major stock market futures markets in the United States continued to fall, and the Dow futures once triggered a "circuit breaker". Huang Zehang, an analyst at Yaocai Securities, said in an interview with Bloomberg that although the Fed's policy is favorable, injecting market liquidity cannot directly solve the problems caused by the epidemic, and it is difficult for the real economy to be supported through liquidity.
In a new report, goldman Sachs economists predicted that the U.S. economy would contract sharply in late March and April as a result of spending cuts by consumers and businesses. "After zeroing growth in the first quarter of this year, the world's largest economy will shrink by 5 percent in the second quarter," the report reads. Goldman Sachs lowered its full-year U.S. growth forecast to 0.4 percent from 1.2 percent.
The Ming Bond Research Team of CITIC Securities believes that from the two economic crises of 1929 and 2008, "at the end of the long technology cycle, the loose monetary environment led to excessive growth of debt, which may be a symptom of the global economy falling into a crisis." The current global financial markets have taken on the characteristics of the eve of the financial crisis.
Global financial markets suffered a sharp setback last week. U.S. stocks have experienced two circuit breakers, and all three major indexes have recorded large declines, with the Dow Jones falling 10.36% weekly, the S&P 500 falling 8.79% weekly, and the Nasdaq falling 8.17% weekly. European stocks also posted their biggest drop since the 2008 financial crisis last week. As of Friday, Germany's DAX was down 20.01% weekly, France's CAC40 was down 19.86% weekly, and Britain's FTSE 100 was down 16.97% weekly, all of which were double-digit percentages.