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Quote of the Day: “I have talked to the heads of almost every single one of these firms in the last 72 hours, and Ben Bernanke has no idea what it’s like out there. None. And Former St. Louis Fed. President Bill Poole has no idea what it’s like out there. My people have been in this game for 25 years and they’re losing their jobs, and these firms are going to go out of business, and he’s nuts! They’re nuts! They know nothing! … This is a different kind of market, and the Fed is asleep.” – Jim Cramer 8/3/07
We’ve got no cases of “the Mondays” to deal with this morning as US equity futures have been rallying all morning and trade near their highs of the session on positive economic data out of Europe (first expansionary manufacturing PMI reading in 18 months) and a slowing of Covid cases in the US. The S&P 500 is poised to open at levels it hasn’t traded at since 2/24, while the Nasdaq is indicated to open up just under 1%. That may sound like a good move for the Nasdaq, but keep in mind that the index has rallied more than 1% on seven of the last eight Mondays. That’s impressive!
Be sure to check out today’s Morning Lineup for a rundown of the latest stock-specific news of note, key earnings and economic news in Europe and the US, trends related to the COVID-19 outbreak, and much more.
The Fed may have been asleep back in August 2007, but they have gone out of their way to not make the same mistake this time around. The floodgates have been busted wide open with liquidity. At the time of Jim Cramer’s rant thirteen years ago today, the Fed Funds rate was over 5%. Today, it’s not only at zero, but the Fed has been actively purchasing government, agency, and corporate debt. The Fed of 13 years ago was downright prudish compared to the Fed today.
Cramer’s rant also came right near the market peak and was quickly followed by one of the largest equity drawdowns in US stock market history. By March 2009, the S&P 500 was down more than 50% as much in the way of personal retirement savings, many banks and corporations, and the entire financial system were nearly wiped out.
In the stock market, though, time often acts as the best elixir. It took four years for investors to get back to even from the time of Cramer’s now-famous comments. Longer-term, though, investors have been rewarded for staying the course. Through last Friday, the S&P 500 was up just under 200% versus where it was 13 years ago, and on an annualized basis, that works out to over 8.5%.