adplus-dvertising
Connect with us

Business

The Fed is providing way more help for the markets now than it did during the financial crisis – CNBC

Published

4 years ago

 on


Federal Reserve Chairman Jerome Powell testifies before a House Financial Services Committee hearing on the “Semiannual Monetary Policy Report to Congress,” at the Rayburn House Office Building in Washington, U.S., July 18, 2018. 

Mary F. Calvert | Reuters

With its groundbreaking announcement Monday of further forays into the financial markets, the Federal Reserve has indicated it will surpass its response to the financial crisis in terms of timing, intensity and, ultimately, monetary value.

The latter part of that matrix will only be a matter of time as the Fed continues its role in the battle against the coronavirus and its stunning impact on the U.S. economy.

The central bank’s intention to unload almost all of its remaining firepower seems destined to take it beyond the money-printing initiatives of the previous crisis, and its alphabet-soup array of programs is greater in scope than even all the programs it had launched during the worst economic downturn since the Great Depression.

When everything is done, the Fed could have a balance sheet, consisting mainly of the bonds it has purchased to support markets and the economy, approaching $10 trillion, according to Krishna Guha, head of global policy and central bank strategy for Evercore ISI.

“As things stand the Fed is racing very quickly towards a $7 trillion balance sheet and our best guesstimate is that it might peak in the very broad vicinity of $9 or $10 trillion,” Guha said in a note to clients. “This is monetized credit policy and fiscal-monetary support on a grand scale.”

The central bank’s efforts in that regard, taken within a month’s time of when the novel coronavirus began chocking financial markets, easily beats the timeline during the financial crisis.

The race to ease

Indeed, the Fed starting in December 2008 increased its bond holdings by $3.7 trillion, pushing the total balance sheet past $4.5 trillion in operations that spanned six years. In a since-abandoned effort to run off some of those holdings, the total slipped below $3.8 trillion at one point. Since the Fed started purchasing assets again, the total has run past $4.7 trillion, the largest in the central bank’s history.

During the crisis, the Fed did not start the so-called quantitative easing program until three months after Lehman Brothers collapsed in September 2015. While its launch of the Troubled Asset Relief Program came shortly after Lehman’s fall, it took six months for other liquidity programs to come online.

The  ambition of the Fed’s current efforts will only grow with Monday’s announcement that the Fed will purchase Treasurys and mortgage-backed securities “in the amounts needed” to support its goals of stabilizing markets.

For some perspective on just how fast the Fed is moving, it intends to purchase $625 billion this week alone. That’s more than the entire $600 billion second leg of quantitative easing that ran for eight months, from November 2010 to June 2011.

Outside of the dollar force of QE, the Fed’s amalgam of programs aimed at freeing up frozen credit markets also is more ambitious than anything it did during the crisis.

Help still needed from Congress

While programs including the Term Asset-Backed Loan Facility and help for the commercial paper and money markets are familiar to financial crisis historians, the Fed has added to its outreach. It now is buying corporate debt for the first time, added commercial mortgage-backed securities to its targeted purchases to help the credit markets, and it expanded the kinds of securities it is accepting as collateral for its liquidity offerings.

Markets, though, are still distressed over the lack of corresponding fiscal stimulus, and stocks sold off aggressively Monday.

But that doesn’t mean the Fed hasn’t done its part — only what it can, at least for now.

“If Congress comes through – which is still our baseline – the combined policy actions should substantially mitigate the risk that the virus shock is amplified by an economy-wide credit shock,” Guha said. “What it will not do is have any great bearing on how long the virus shuts down the economy.”

To underline the importance of getting fiscal and monetary forces working together, the Fed announced a vague proposal targeted to Main Street small business lending that will need help from whatever Congress passes.

“The Fed package is impressive. It’s also necessary, but probably not sufficient,” said Lauren Goodwin, economist and multi-asset portfolio strategist at New York Life Investments. “The real challenge faced by the economy is the fact that businesses are closed. That’s where the federal government needs to step in.”

The Fed, though, might not necessarily be done.

Though it went full-throttle Monday, the central bank has consistently defied critics who say it is running out of ammunition by continuing to come up with new ideas.

The final horizon would be buying stocks and even high-yield corporate bonds, through exchange-traded funds that back big indexes like the S&P 500 and Dow Jones Industrial Average. There’s no sign that the Fed is headed in that direction, but is one final blast it could sound if markets get into too much trouble. The Fed would need permission from Congress first.

“There’s a reason why the government has not wanted this perception of the central bank owning risk assets in the past,” Goodwin said. “But if a liquidity crisis starts to turn into a solvency crisis and we still don’t have that fiscal activity coming in to support the economy, then yes, I think you could continue to see the Fed be creative.”

Let’s block ads! (Why?)

728x90x4

Source link

Related Topics:
Continue Reading

Business

Roots sees room for expansion in activewear, reports $5.2M Q2 loss and sales drop

Published

1 day ago

 on

September 13, 2024

By

 

TORONTO – Roots Corp. may have built its brand on all things comfy and cosy, but its CEO says activewear is now “really becoming a core part” of the brand.

The category, which at Roots spans leggings, tracksuits, sports bras and bike shorts, has seen such sustained double-digit growth that Meghan Roach plans to make it a key part of the business’ future.

“It’s an area … you will see us continue to expand upon,” she told analysts on a Friday call.

The Toronto-based retailer’s push into activewear has taken shape over many years and included several turns as the official designer and supplier of Team Canada’s Olympic uniform.

But consumers have had plenty of choice when it comes to workout gear and other apparel suited to their sporting needs. On top of the slew of athletic brands like Nike and Adidas, shoppers have also gravitated toward Lululemon Athletica Inc., Alo and Vuori, ramping up competition in the activewear category.

Roach feels Roots’ toehold in the category stems from the fit, feel and following its merchandise has cultivated.

“Our product really resonates with (shoppers) because you can wear it through multiple different use cases and occasions,” she said.

“We’ve been seeing customers come back again and again for some of these core products in our activewear collection.”

Her remarks came the same day as Roots revealed it lost $5.2 million in its latest quarter compared with a loss of $5.3 million in the same quarter last year.

The company said the second-quarter loss amounted to 13 cents per diluted share for the quarter ended Aug. 3, the same as a year earlier.

In presenting the results, Roach reminded analysts that the first half of the year is usually “seasonally small,” representing just 30 per cent of the company’s annual sales.

Sales for the second quarter totalled $47.7 million, down from $49.4 million in the same quarter last year.

The move lower came as direct-to-consumer sales amounted to $36.4 million, down from $37.1 million a year earlier, as comparable sales edged down 0.2 per cent.

The numbers reflect the fact that Roots continued to grapple with inventory challenges in the company’s Cooper fleece line that first cropped up in its previous quarter.

Roots recently began to use artificial intelligence to assist with daily inventory replenishments and said more tools helping with allocation will go live in the next quarter.

Beyond that time period, the company intends to keep exploring AI and renovate more of its stores.

It will also re-evaluate its design ranks.

Roots announced Friday that chief product officer Karuna Scheinfeld has stepped down.

Rather than fill the role, the company plans to hire senior level design talent with international experience in the outdoor and activewear sectors who will take on tasks previously done by the chief product officer.

This report by The Canadian Press was first published Sept. 13, 2024.

Companies in this story: (TSX:ROOT)

The Canadian Press. All rights reserved.

Source link

Continue Reading

Business

Talks on today over HandyDART strike affecting vulnerable people in Metro Vancouver

Published

2 days ago

 on

September 12, 2024

By

 

VANCOUVER – Mediated talks between the union representing HandyDART workers in Metro Vancouver and its employer, Transdev, are set to resume today as a strike that has stopped most services drags into a second week.

No timeline has been set for the length of the negotiations, but Joe McCann, president of the Amalgamated Transit Union Local 1724, says they are willing to stay there as long as it takes, even if talks drag on all night.

About 600 employees of the door-to-door transit service for people unable to navigate the conventional transit system have been on strike since last Tuesday, pausing service for all but essential medical trips.

Hundreds of drivers rallied outside TransLink’s head office earlier this week, calling for the transportation provider to intervene in the dispute with Transdev, which was contracted to oversee HandyDART service.

Transdev said earlier this week that it will provide a reply to the union’s latest proposal on Thursday.

A statement from the company said it “strongly believes” that their employees deserve fair wages, and that a fair contract “must balance the needs of their employees, clients and taxpayers.”

This report by The Canadian Press was first published Sept. 12, 2024.

The Canadian Press. All rights reserved.

Source link

Continue Reading

Business

Transat AT reports $39.9M Q3 loss compared with $57.3M profit a year earlier

Published

2 days ago

 on

September 12, 2024

By

 

MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.

The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.

The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.

Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.

On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.

Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.

This report by The Canadian Press was first published Sept. 12, 2024.

Companies in this story: (TSX:TRZ)

The Canadian Press. All rights reserved.

Source link

Continue Reading

Trending