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Pro Perspectives 2/27/20

February 27, 2020

The bloodletting continues in global markets, with the continuation of zero visibility on containment of the coronavirus.
At today’s close, we now have a 12% decline in the S&P 500 in just six days.  And the big triple-bottom in the 10-year yield has given way, trading down to 1.24% today (new record lows).
Interestingly, as global markets are getting hit.  The Chinese markets, the origin of the virus, have completely recovered the losses associated with the epidemic that began unfolding in late January.  Why?  Intervention.
Remember, in early February, the Chinese stepped in, proactively and rolled out a number of measures to shore up the economy and markets.  They have a quarter of a trillion dollars of fresh liquidity flowing through their financial system, which undoubtedly is being used to stabilize and prop up markets (among many other things).
On the “intervention” note:  With the lack of prospects that this, now, global virus will be contained, policymakers need to step up with some action.  It was suggested today in an WSJ Op-Ed, written by a former Fed Chair candidate, that the Fed, BOJ, ECB, BOJ and BOE step in with a coordinated rate cuts and assurance that they are ready to do more.  That may help.
But higher level coordination is probably needed.  We need major governments to come together, in coordination, on a containment strategy, to be accompanied by fiscal stimulus.
If we think back to the global financial crisis, the turning point for markets and global confidence, was the G20 meeting in April of 2009, when the G20 pledged to work together to resolve “a global crisis with a global solution.” 
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Bryan: