Skip to main content
logo
  • Products

    Investment Vehicles

    • ETFs
    • Commingled Funds
  • Investment Strategies

    Investment Options

    • Alternatives
    • Beta Strategies
    • Equities
    • Fixed Income
    • Global Liquidity
    • Multi-Asset Solutions
    • Commingled Funds

    Capabilities & Solutions

    • ETFs
    • Global Insurance Solutions
    • Liability-Driven Investing
    • Pension Strategy & Analytics
    • Outsourced CIO
    • Retirement Plan Solutions
    • Sustainable Investing
  • Insights

    Market Insights

    • Market Insights Overview
    • Eye on the Market
    • Guide to the Markets
    • Guide to Alternatives
    • Market Updates

    Portfolio Insights

    • Portfolio Insights Overview
    • Alternatives
    • Asset Class Views
    • Currency
    • Equity
    • Fixed Income
    • Long-Term Capital Market Assumptions
    • Portfolio Strategy
    • Sustainable Investing Insights
    • Strategic Investment Advisory Group

    Retirement Insights

    • Retirement Insights Overview
    • Guide to Retirement
    • Defined Contribution
  • Resources
    • Center for Investment Excellence Podcasts
    • Events & Webcasts
    • Insights App
    • Library
    • Taft-Hartley
    • Market Response Center
    • NEW: Morgan Institutional
  • About Us
    • Trusted Asset Manager
    • Diversity, Equity & Inclusion
  • Contact us
  • English
  • Role
  • Country
  • Morgan Institutional
    Search
    Search
    Menu
    You are about to leave the site Close
    J.P. Morgan Asset Management’s website and/or mobile terms, privacy and security policies don't apply to the site or app you're about to visit. Please review its terms, privacy and security policies to see how they apply to you. J.P. Morgan Asset Management isn’t responsible for (and doesn't provide) any products, services or content at this third-party site or app, except for products and services that explicitly carry the J.P. Morgan Asset Management name.
    CONTINUE Go Back
    1. Can the Fed do more?

    • LinkedIn Twitter Facebook

    Can the fed do more?

    03/17/2020

    Alex Dryden

    Jack Manley

    This past Sunday, the U.S. Federal Reserve (Fed) fired a last desperate salvo in an attempt to stabilize financial conditions, the second emergency inter-meeting cut in two weeks. In addition to cutting the federal funds rate range to 0-0.25%, the Fed also re-launched quantitative easing and loosened lending conditions in an attempt to keep credit flowing to the real economy. Just two days later, the Fed announced a special credit facility, supported by Treasury, to purchase unsecured corporate paper in an effort to shore up liquidity for struggling businesses. But despite the unprecedented amount of monetary policy stimulus, volatility continued in financial markets: Monday’s market close had the S&P 500 recording its third consecutive daily move of greater than 9%, a feat last seen in October 1929; the rest of the week will likely feel similar.

    Many investors are, therefore, wondering: can the Fed do more? Unfortunately, moving forward, the Fed’s options for additional stimulus are limited, and each comes with a set of complications that challenge their viability:

    • An overhaul of regulatory conditions: current liquidity requirements have locked up cash and a ban on proprietary trading prevents banks from supporting credit markets; adjustments to these rules could ease conditions. However, regulatory reform is a slow process and, therefore, unlikely in the near-term.

    • A broadened policy remit: negative interest rates or an expanded asset purchase program by which the Fed can purchase corporate bonds. However, Fed officials have been openly skeptical of these unorthodox policies, particularly negative rates, and such changes would likely require Congressional approval.

    • A targeted lending program: additional support for virus-impacted small and medium size firms. Because the Fed is unable to assume credit risk, future lending programs will require additional support from and coordination with U.S. Treasury.

    • Ultimately, investors must realize that easier monetary policy, regardless of its current or future form, makes income harder to come by. It should, therefore, force money into risk assets, supporting public equity market valuations and encouraging investors, where and when suitable, to reach for income in higher-yielding, but riskier, private markets. Most high quality bonds will be relegated to a role of insurance.

      Perhaps more importantly, though, is the realization that the effectiveness of monetary policy is likely approaching its limits, particularly given the complex politics underlying the need for future inter-agency coordination. It is also important to remember that monetary policy can only do so much in addressing fears related to a pandemic: the reasons for, and the problems because of, things like “social distancing” cannot be fixed by lower interest rates. For this reason, robust fiscal stimulus is urgently needed to first stabilize both financial markets and the economy, and second, to promote recovery.


    0903c02a82848da9

    EXPLORE MORE

    On the Minds of Investors

    What investment questions are on the minds of investors? Explore the questions investors ask frequently and find answers at J.P. Morgan Asset Management.

    Read more

    Guide to the Markets

    The J.P. Morgan Guide to the Markets illustrates a comprehensive array of market and economic histories, trends and statistics through clear charts and graphs.

    Read more

    Asset Class Views

    Get quarterly commentary and in-depth analysis on equities, fixed income and other asset classes, written by our senior investment teams.

    Read more
    • Markets
    • Economy
    J.P. Morgan Asset Management

    • About us
    • Investment stewardship
    • Privacy policy
    • Cookie policy
    • Binding corporate rules
    • Sitemap
    • Accessibility
    Opens LinkedIn site in new window
    J.P. Morgan

    • J.P. Morgan
    • JPMorgan Chase
    • Chase

    This website is a general communication being provided for informational purposes only. It is educational in nature and not designed to be a recommendation for any specific investment product, strategy, plan feature or other purposes. By receiving this communication you agree with the intended purpose described above. Any examples used in this material are generic, hypothetical and for illustration purposes only. None of J.P. Morgan Asset Management, its affiliates or representatives is suggesting that the recipient or any other person take a specific course of action or any action at all. Communications such as this are not impartial and are provided in connection with the advertising and marketing of products and services. Prior to making any investment or financial decisions, an investor should seek individualized advice from personal financial, legal, tax and other professionals that take into account all of the particular facts and circumstances of an investor's own situation.

    Opinions and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. We believe the information provided here is reliable but should not be assumed to be accurate or complete. The views and strategies described may not be suitable for all investors.

    INFORMATION REGARDING INVESTMENT ADVISORY SERVICES:   J.P. Morgan Asset Management is the brand for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. Investment Advisory Services  provided by J.P. Morgan Investment Management Inc.

    INFORMATION REGARDING MUTUAL FUNDS/ETF: Investors should carefully consider the investment objectives and risks as well as charges and expenses of a mutual fund or ETF before investing. The summary and full prospectuses contain this and other information about the mutual fund or ETF and should be read carefully before investing. To obtain a prospectus for Mutual Funds: Contact JPMorgan Distribution Services, Inc. at 1-800-480-4111 or download it from this site. Exchange Traded Funds: Call 1-844-4JPM-ETF or download it from this site.

    J.P. Morgan Funds and J.P. Morgan ETFs are distributed by JPMorgan Distribution Services, Inc., which is an affiliate of JPMorgan Chase & Co. Affiliates of JPMorgan Chase & Co. receive fees for providing various services to the funds. JPMorgan Distribution Services, Inc. is a member of FINRA  FINRA's BrokerCheck

    INFORMATION REGARDING COMMINGLED FUNDS: For additional information regarding the Commingled Pension Trust Funds of JPMorgan Chase Bank, N.A., please contact your J.P. Morgan Asset Management representative.

    The Commingled Pension Trust Funds of JPMorgan Chase Bank N.A. are collective trust funds established and maintained by JPMorgan Chase Bank, N.A. under a declaration of trust. The funds are not required to file a prospectus or registration statement with the SEC, and accordingly, neither is available. The funds are available only to certain qualified retirement plans and governmental plans and is not offered to the general public. Units of the funds are not bank deposits and are not insured or guaranteed by any bank, government entity, the FDIC or any other type of deposit insurance. You should carefully consider the investment objectives, risk, charges, and expenses of the fund before investing.

    INFORMATION FOR ALL SITE USERS: J.P. Morgan Asset Management is the brand name for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide.

    NOT FDIC INSURED | NO BANK GUARANTEE | MAY LOSE VALUE

    Telephone calls and electronic communications may be monitored and/or recorded.

    Personal data will be collected, stored and processed by J.P. Morgan Asset Management in accordance with our privacy policies at https://www.jpmorgan.com/privacy.

    If you are a person with a disability and need additional support in viewing the material, please call us at 1-800-343-1113 for assistance.

    READ IMPORTANT LEGAL INFORMATION. CLICK HERE >

    The value of investments may go down as well as up and investors may not get back the full amount invested.

    Copyright 2023 JPMorgan Chase & Co. All rights reserved.