PHILADELPHIA – After several days of significant ups and downs in the markets, the economic damage caused by the coronavirus, due to both international health scares and perhaps American politics as well, nationally syndicated host and biblical investing authority Dan Celia is weighing in on an interesting week of financial headlines.
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The Volatility And Economic Damage Caused By Coronavirus
“After two back-to-back weeks of extreme volatility-most of it on the downside-it’s certainly not beyond the realm of possibility that we could see another 10% drop in the near term,” Celia said. “The question is: How long will this last? I don’t think it will last all year long; this is a transitory effect. Many claim that all this volatility is because of the economic damage stemming from coronavirus worries, and certainly that is true if we don’t start to see containment soon or a drop in cases due to warmer weather.
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The lack of GDP growth globally is almost certain, but we’ll have to wait and see. U.S. equities will fare far better than most countries because we’ve started from a much higher place in a much stronger position, whereas everyone else’s economy was already extremely fragile before any of this started. For example, it’s likely that Germany will slip into recession this year.
“One of the biggest problems I am concerned about—but, apparently, I’m the only one—is, as I expected and talked about all week long, the U.S. dollar has fallen amid expectations that the Federal Reserve could cut interest rates even further,” he continued. “
First of all, let’s make something clear, and I’ll say it again—there is absolutely no reason for the Federal Reserve to have slashed rates by 50 basis points this week, and certainly there won’t be another emergency move that would cause the Fed to slash them again. The Federal Reserve in its Beige Book report mentioned the epidemic 48 times.
They do this to suggest that policymakers are highly concerned about economic damage from this disease. How about we get through this transitory effect before we start dropping rates?”
Impact On Our Treasury Bills
Celia added that he is all for trying to get ahead of a downturn, but this is not an economic downturn.
“This was not caused by a geopolitical event or an economic event that is likely to be long-lasting,” he said. “The Fed does not need to be trashing the dollar. And what about Treasury rates yesterday? Remember, our debt is desirable because we’re the strongest dollar in the world.
We were the only treasury bill or government bond that had a whole number in front of that decimal point. But it looks like that is going by the wayside, and we will be just like every other country. There will be no incentive and no reason for other countries to buy our debt. Then what?”
Celia discusses these and other global and economic headlines on his daily, three-hour “Financial Issues” program, heard on more than 660 radio stations and several television networks nationwide, including FISM.TV, viewed on several post-cable television platforms and online.