Date: Wed, 29th April 2020
Author: Ines Ferré
A top strategist predicated that investors could be ahead of themselves if they’re looking forward to an economic V-shaped recovery.
“We've got this epic battle between monetary and fiscal policy on one side, and weak economic earnings, earnings data on the other,” Tony Dwyer, managing director and chief market strategist at Canaccord Genuity, told Yahoo Finance.
Dwyer believes, examining the yield curve spread between the 2-year and 10-year US Treasury is possibly an indicator of when the economy goes into a recession and when it’s expected to come out of one.
“Having a very, very flat yield curve is telling you that the economy is going to be very slow coming out of the recession and that you want to maybe just kind of wait for some of the overbought condition that was created on this relief rally to work itself out,” he added.
Dwyer points out that investors are unclear on which direction to head as the markets swung from a “panic mode” in March into the recent relief rally and are now in a “frustration phase”.
Dwyer expressed, “You're well off the low so you can’t identify, ‘wow, we're that oversold anymore,’ “But it's too early to expect this major economic recovery, and you get a lot of back and forth.”
He also stated that the markets are pretty much stagnant since April 9 after the Federal Reserve announced a $2.3 trillion plan in efforts, to help Main Street businesses, local governments and including the purchases of high-yield bonds.
The Federal Reserve is ‘so not out of bullets’
Dwyer expressed that the Federal Reserve is by no means out of ammunition to continue to help the economy. He added that, “As long as the U.S. is a primary currency, we can print as much money as we want,” “I'm not saying whether that's good or bad.”
He also expressed that the Federal Reserve’s April 9 decision was a “game-changer” implying attack on any area of the economy especially where levels of stress are evident.
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