(MarketWatch) The last trading day of the week has it all, so buckle up.
It has been a tale of two Internet giants, with Amazon shares down as its record earnings run ground to a halt, while those of Google parent Alphabet are up after better-than-expected results late Thursday. So far, tech stocks seem ready to look on the bright side.
Gross domestic product data has rolled out and it was slightly above expectations. Some were hopin for a bad-news-is-good-news outcome to help firm up expectations for an interest-rate cut when the Federal Reserve meets next week. So far, stocks are taking that data in stride.
Markets clearly would like to see a sense of urgency from central banks, given the negative reaction to ECB President Mario Draghi, who on Thursday failed to lay out concrete plans for any interest rate cuts or stimulus, even as he spoke of “worse and worse” economic conditions.
That brings us to our call of the day from billionaire hedge-fund manager Kyle Bass, who says look out, because the Federal Reserve is losing its punch when it comes to making a dent on the economy with rate cuts.
“I think in early 2020, you are just going to see softness in the U.S. economy. We might have shallow recession, but if we do...we will immediately go to zero rates,” the founder and chief investment officer of Hayman Capital Management told CNBC in an interview late Thursday.
And once you’ve taken interest rates to nearly zero, they really are “less and less effective,” Bass says. If that’s the way the wind is blowing this time, he says investors will want to stick to long-term assets like real estate — apartments and office buildings — and long-term bonds.
Note, the last time the Fed pushed interest rates close to zero was in December 2008, when they hit an all-time low of 0.25%. And the 10th rate cut in just over a year still didn’t stop the recession that followed.
That was the gist of what we heard earlier this week from Stack Financial Management’s president James Stack, who spoke to MarketWatch about the Fed’s record in preventing a recession and market crash.
“We have to keep in mind that the Federal Reserve started easing in 2007 before the recession started, and then subsequently made 12 rate cuts and was virtually powerless in preventing the unwinding, the downward path in recession,” said Stack, who predicted the dot-com and last housing bust.
