Over the course of the last month, the Fed has initiated aggressive actions to help fight off the economic effects of the COVID-19 and oil market contraction. The magnitude of the stimulus, now a staggering $8.5 trillion, has lowered investor angst and help the markets rebound roughly 25% from the March lows.
The initial packages included:
- Cutting rates twice in March to near 0%
- Participating in the overnight commercial paper markets to make sure there is ample liquidity in the money markets
- Launching $700 billion quantitative easing program targeted at buying U.S. Treasury and mortgage backed bonds
- Announcing they would provide up to $300 billion in new financing to small businesses
- Extending lines of credit to companies
- Extending swap lines to various countries
Additional expanded facilities were announced today in addition to the announcement that the Fed will facilitate several programs from the CARES Act. These include:
- Facilitating up to $2.3 Trillion in loans to businesses of all sizes, as well as to struggling city and state governments
- Providing up to $500 Billion in short term liquidity facilities for main street and municipalities
- Expanding the primary and secondary corporate debt facilities and TALF (Term Asset-Backed Securities Loan Facility) to $850 Billion. High Yield ETF’s will now be included in the program
Disclosure: This Commentary represents a review of topics of possible interest to Pennsylvania Trust’s clients and is not personalized investment advice. It contains Pennsylvania Trust’s opinions, which may change following the date of publication. Information obtained from third-party sources is assumed to be reliable but is not guaranteed. No outcome — including performance — is guaranteed, due to various uncertainties and risks. This document is not a recommendation of any particular investment. Investment decisions for clients are made on an individualized basis and may be different from what is expressed here. Past performance is no guarantee of future results.