Has the optimism of investors run out?
On Thursday, June 11, we saw the Dow tumble more than 1,000 points for the first time since April.
The downturn came after Federal Reserve said it could take a long time for the U.S. economy to recover after being battered by lockdown measures instituted during the coronavirus pandemic.
The Federal Reserve on Wednesday, June 10 left interest rates unchanged, and projected interest rates would remain near zero through 2022. The central bank also said it would keep buying bonds and do what it takes to prop up the economy.
“We’re not thinking about raising rates, we’re not even thinking about thinking about raising rates,” Federal Reserve Chairman Jerome Powell told reporters at a press conference following the Fed’s announcement on interest rates.
The Fed said it expects the U.S. economy to contract 6.5% in 2020, but then expand by 5% in 2021, raising the specter of a possible boomerang recovery that may still be fraught with both uncertainty and possibly inflation.
So, has the optimism just run out or have investors realized that the hole that the coronavirus dug i the economy is deeper than expected?
“I think that we had too much optimism from the reopening of America to oil going all the way back up,” said Jim Cramer.