Ally Strategist Says Fed Doing The Right Thing With Markets In Turmoil: 'A Shot In The Arm'

The economic impact of the coronavirus pandemic has been substantial. The Federal Reserve decreased rates, increased liquidity, helped ease dollar funding pressures and kept borrowing costs low with the aim of ensuring an uninterrupted flow of credit to businesses and governments.

“These are unprecedented times,” Ally Financial Inc ALLY Chief Investment Strategist Lindsey Bell told Benzinga.

“It’s a difficult time for investors. There's a lot of uncertainty about the moves we’re taking, the governments are taking and the cities are taking.”

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The Fed's moves have been proactive, backstopping volatile markets during a wide business slowdown, the Ally exec said. 

“They were very quick to respond to what was the tightening credit market — trying their hardest to add liquidity,” Bell said.

“The second quarter is likely to show negative GDP growth — that is on the investor’s mind. I think what the Fed did was a shot in the arm of the financial system. It’s really about protecting against what can happen down the road, instead of what’s happening now.”

Fiscal Stimulus A Complement, Bell Says 

The coronavirus relief legislation working its way through Congress helps shore up the confidence of the American consumer, Bell said. 

Last week, Bank of America strategists suggested that nearly 3.5 million jobs will be lost due to the coronavirus crisis.

The latest new unemployment claims reported Thursday by the Bureau of Labor Statistics hit a whopping 3.28 million. 

The numbers are so great that the Trump administration asked states to hold off on releasing them.

The Senate passed a $2-trillion stimulus package Wednesday that now goes to the House of Representatives for consideration. 

All aspects of the system are finally starting to come together, Bell said.

“The third leg of the stool will be our health care response. Our ability to test Americans, to figure out who has it and who needs to be treated,” she said. “Maybe this will stabilize the market.”

Bell Says Not To Panic, Give It Time

Despite the markets trending higher on a long-term basis, the economy has been pummeled with bad news and mixed stimuli, Bell said. 

“We’ve declined so significantly. You get to the point of: ‘where is the bottom?’”

Bell urges investors to remain calm and said the market has presented a great opportunity to get involved long-term.

“The Dow down 30% has, in the last two recessions — 2000 and 2008 — been a decent time to buy into the market, even though those bear markets ended down greater than 50%,” she said. “When those two bear markets were down, 30% proved to be a pretty good place to buy stocks because even though you had a little further to go, you regained that first 20% a little more quickly.”

Ally Strategist Cautiously Optimistic

The pandemic-driven downturn gives corporations a chance to "shine," the Ally exec said.

Facebook, Inc. FB has announced its intention to give every employee $1,000 as they face a pandemic, in addition to working with businesses that advertise on the platform.

“They’re looking to give money back to them in the form of advertising credit," Bell said.

During the last 11 years, companies have gained a bad reputation when it comes to their propensity not to invest back into stakeholders like employees and communities, she said. 

“They can really step up and say, ‘hey, we didn’t cause this crisis, but we’re here to help you. We’re going to work with you.’”

Photo by Michal Marek from Pexels.