Stocks are tumbling again today after last night’s address from President Trump. His response to the coronavirus outbreak, which includes a European travel ban, didn’t seem to calm investors.
At the open this morning, the S&P 500 hit its trade-halting “circuit breaker.” All three major indexes – the Dow, S&P, and Nasdaq Composite – are now officially in bear market territory.
And while many analysts were disappointed with the White House’s emergency maneuvers, some believe there’s still hope for more.
“I think that’s about to change,” said CNBC’s Jim Cramer about the Trump administration’s course of action.
“I think that they will perhaps consider the idea that the federal government does not need to be paid during this period so therefore the people, the working people, get paid and are protected.”
“I think they are debating the notion about whether they should have a trust fund […] also debating the notion right now about whether the Federal Reserve should be able to guarantee credit lines,” he said.
“The Treasury trust fund would indeed, perhaps, take advantage of the lower rates and make it so that people feel their credit lines would be backed up.”
Cramer believes that several plans are “being debated right now” and that investors are “going to get clarity” soon. Around 9:38 a.m. EST, Cramer took a phone call live on CNBC from an unannounced caller, who was likely Larry Kudlow, Trump’s top economic advisor, or one of his representatives.
Kudlow was a former co-host (alongside Jim Cramer) of CNBC’s television program, “Kudlow & Cramer.” The show covered American business and political topics, and since its final season aired in 2005, the two analysts have remained friends.
Back in 2018, Cramer accurately predicted that Kudlow would replace Gary Cohn as Director of the National Economic Council.
His comments this morning suggest that Cramer has an inside track on what the Trump administration is planning.
Roughly an hour after Cramer’s remarks, Kudlow told Republican leaders that the President might sign a Stafford Act disaster declaration this afternoon. If Trump does so, extra assistance will be provided by the federal government to state and local governments in the hopes of containing and treating the COVID-19 outbreak.
A declaration of that nature could help reduce the number of infections. Whether or not it helps the tumbling market is a different story.
Over the last month, any mention of the coronavirus from institutions has only sent stocks lower. The Fed’s rate cut let investors know that the outbreak was a serious economic threat.
Trump’s address last night hammered that point home even more.
A massive buying opportunity is likely coming, but if stocks don’t go on a week-long recovery (or more), there’s no point taking a gamble on long positions.
Not yet, at least.
A disaster declaration this afternoon could just make matters worse for bulls. Standing aside, frustrating as it may be with equities at a near-30% discount, is still the best move.
And yes, that even includes if the Fed takes rates to zero – something that would’ve sent stocks soaring just one year ago.
