Scott Minerd Says Markets at ‘Moment of Truth’ After Emergency Fed Cut
Scott Minerd Says Markets at ‘Moment of Truth’ After Emergency Fed Cut
(Bloomberg) -- The worst week since the financial crisis, then the best rally in a year. Stocks have turned volatile and the Federal Reserve just cut rates to steady things. Will it work?
Scott Minerd doesn’t think so.
“While I believe this rate cut is a necessary act, I doubt it is sufficient to bail out the market. Now is the moment of truth,” Minerd, who oversees about $215 billion for Guggenheim Investments, said in an email. “We will now see how potent monetary policy is at addressing this crisis.”
The Fed delivered the first emergency cut since the financial crisis in an attempt to protect the longest-ever economic expansion from the spreading coronavirus. Stocks jumped more than 2% on the news, only to crater after Chairman Jerome Powell said risks to the economy have changed. To be sure, it was Powell’s declaration Friday afternoon that the Fed was ready to act that stopped the carnage last week and gave way to Monday’s 5% surge.
Still, skepticism set in that the Fed’s emergency cut will be able to cushion markets from the outbreak’s impact. Easier monetary policy won’t lift travel restrictions or stop event cancellations that are starting to slow economies around the world as governments move to contain the virus’s spread, the concern holds.
U.S. stocks could fall an additional 15% -- or more -- from their current levels, Minerd told Bloomberg TV on Tuesday. The yield on 10-year Treasuries, already near record-lows, could fall to 0.25%, while 30-year bonds yielding 1% is “almost inevitable at this point.” The Fed, he said, will have to continue to ease.
“People are cautious, investors are cautious,” Minerd said. “It would be premature to be stepping in now other than maybe to buy U.S. Treasuries or maybe things like gold and silver.” He urged policy makers in D.C. to prepare a fiscal policy response to combat the outbreak.
Last week, amid one of the darkest stretches for U.S. stocks since 2008, Minerd, who is Guggenheim’s chief investment officer, said the outbreak is “possibly the worst thing” he’s seen in his career because of its potential global spread and the Fed’s limited tools to staunch potential economic fallouts.
“This has the potential to reel into something extremely serious,” Minerd told Bloomberg TV last week. “It’s very hard to imagine a scenario where you can actually contain this thing.”
--With assistance from Katherine Greifeld, Scarlet Fu and Tom Keene.
To contact the reporters on this story: Vildana Hajric in New York at vhajric1@bloomberg.net;John Gittelsohn in Los Angeles at johngitt@bloomberg.net
To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Dave Liedtka
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