Treasury Secretary Steven Mnuchin said he does not expect that the coronavirus will cause a full-blown recession, predicting that the economy will move swiftly through a temporary slowdown and into a big market rebound.
Mnuchin said the key issue was not the economy’s position on the business cycle, but how the country copes with the crisis.
“The real issue is not the economic situation today,“ Mnuchin said. ”The real issue is what economic tools are we going to use to make sure we get through this.”
The pandemic has forced closures of schools, cancellation of events, and business disruption across the United States. There are over 60 confirmed COVID-19 deaths nationwide.
Mnuchin said that to minimize economic contagion, it was necessary to get relief for the economy and ensure businesses have ample liquidity.
Seeking to prevent a liquidity crunch, the Fed announced Thursday it would make $1.5 trillion available for overnight lending markets and start purchasing a broader range of U.S. Treasury securities as part of its monthly purchases.
“There will be a massive amount of liquidity,” Mnuchin told CNBC in an interview Friday, adding, “We’ll be rolling out other programs.”
‘Big Rebound Later This Year’
Wall Street’s spectacular drop into a bear market last week took place as the World Health Organization declared COVID-19 a global pandemic, amid more and more country lockdowns and growing business disruption.“What I’d focus on is what do we need to do right now because it’s clear we need to get economic relief to the economy right now,” Mnuchin said. “If the medical professionals are correct and we’re doing all the things, I expect we’ll have a big rebound later in the year.”
“This isn’t like the financial crisis, as I’ve said, this will have an end to it as we confront the virus,” Mnuchin told host Chris Wallace. “What I’d focus on is we need to get economic relief to the people who are impacted by this.”
“I have every confidence that this market is going to be higher down the road and the U.S. is still the greatest place to invest,” Mnuchin added.
‘That Was a Record’
In a dazzling display of market volatility last week, the Dow Jones hit both a record low and a record high, in terms of points gained or lost in a single trading day.The blue-chip index staged a heated rally just before closing bell Friday as President Donald Trump declared a national emergency and outlined the nation’s coronavirus response strategy, including an explicit pledge of $50 billion in federal aid.
The Dow (DJI) surged 1,985 points, or 9.36 percent, to 23,185.62 points, representing a new all-time high on a points basis, according to Refinitiv Eikon data.
“That was a record. All-time record. I think we should do one of them every day, perhaps. How about every—how about five times a day? We'll do one five times a day,” Trump joked.
“But that was something to watch,” the president added, referring to the price action breaking through the 200-day moving average, an important barrier of resistance towards further price growth.
“And I had no idea,” Trump said. “We walked back, I said, “So how did that work out?” They said, “Sir, you just set a new record in the history of the stock market.” So that was pretty good.”
Amid a week of spectacularly volatile trading, Friday’s Dow gain was its largest ever, while Thursday, Monday, and Wednesday, were the index’s largest, second-largest, and third-largest one-day point declines, respectively.
“President Trump’s national emergency declaration was a turnaround performance relative to his travel ban announcement,” said Allen Sukholitsky, chief macro strategist at Xallarap Advisory.
Volatility
Mnuchin’s comments come after markets experienced a period of volatility in stocks last not seen since the 2008 financial meltdown.Amid wild swings, key U.S. stock indexes tumbled last week, ending the longest bull market on record.
But wild swings also provide profit opportunities, and long-term investors who bought into the market at previous lows, remain well ahead.
“What I can tell you is people who bought stocks after the crash in 87, people who bought stocks after the financial crisis did really well, so in terms of long-term investors,” Mnuchin told Wallace on the program, expressing confidence in a significant market rebound.
