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Wall Street's Message to Washington Is Loud and Clear: Do Something

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The message from Mr. Market to Washington is loud and clear: Do something.

What began as concern over how companies will navigate through the ongoing coronavirus epidemic has quickly morphed into a game of chicken between Wall Street and Washington - with Wall Street clearly garnering the better odds.

From still-idle factories in China and other parts of Asia to warnings from the likes of Microsoft (MSFT) - Get Report, Apple (AAPL) - Get Report and other major companies, the consensus is not if, but by how much Covid-19 will impact growth.

At the same time, the plunge in stocks and surge in bonds has rapidly turned into a not-so-subtle smoke signal from Wall Street to the Federal Reserve to do something - and fast.

That has analysts and investors calling for the Federal Reserve and President Donald Trump's administration to do something to offset what they see will be a significant growth impact. 

“Once markets are gripped by fear, the only way to break the back of financial panic is for the government authorities and the central bank to take firm action aimed at helping the economy overcome any foreseeable difficulty,” said Chen Zhao, chief strategist with Montreal-based economic research firm Alpine Macro. 

“Otherwise, fear and panic can become self-feeding, leading to more financial calamity and economic damage.”

Early on, China was criticized for not doing enough to offset the virus’ massive blow to its economy, the second-biggest in the world. In the past month, however, the Chinese government has taken numerous and drastic measures to help the economy, including large interest rate cuts, injections of cash, tax exemptions, public investments in hospitals and health care, and even subsidized loans to struggling companies.

Now, Wall Street is turning to Washington and looking for the same kind of support - and so far, it's not liking what it's getting.

“I gave a press conference yesterday that was really a very good press conference,” Donald Trump said Thursday. “Basically it was a calming press conference, it was a conference to say we’re doing well.”

Wall Street strongly begged to differ, and expectations are it will continue to do so until Washington steps up.

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