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Loose Monetary Policy Bails Out the Market and Tech—Again


Jun. 5 2019, Updated 10:04 a.m. ET

The Nasdaq rose 2.65% on June 4

The Fed’s assurance of a loose monetary policy was the biggest driver of the resurgence in the markets for most of this year before their rude awakening in May, after which the reignition of the US-China trade war pushed the tech-heavy Nasdaq Composite Index into correction territory in June.

In fact, easy money has been one of the biggest factors driving the ten-year bull market in the US. The Nasdaq Composite Index recovered by a whopping 2.65% on June 4 after the Fed suggested that it could slash interest rates if needed after the escalation of the trade war caused growth estimates to tumble. This was the Nasdaq’s biggest gain in five months.

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Stocks that were beaten up in May surged

Some of stocks that were badly bruised in May surged yesterday. Apple stock (AAPL) was one of the biggest underperformers in tech in May, as investors feared a ban in China after the Trump administration put Huawei on a trade blacklist. Apple stock has fallen ~18% since May 3. It jumped 3.7% on June 4.

Chip maker NVIDIA (NVDA), which generates a good chunk of its revenue from China, has fallen nearly 30% since April 23. The stock soared 6.9% on June 4.

While the appetite for risky assets was back on June 4, the worst may not be over for stocks, as there’s still uncertainty looming regarding the trade war, which threatens to slow the global economy. In the short term, though, a benign credit market could offer some support to the markets.


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