Elite Capital International: Scaramucci sounds off on why markets are so volatile, hitting Fed
As Coronavirus outbreak continues and still mongers fears all throughout the globe, an Ex-White House Advisor (He works with President Donald Trump for two weeks as the latter’s Communications Director) and investor Anthony Scaramucci said that he was never been more defensive on equities.
Just this Monday, February 24. 2020 investors experienced the worsens one-day decline on stocks in the past two years due to fear of the outbreak of the Novel Coronavirus (COVID-19). With another early rally happened last Tuesday made investors scamper to a safer harbor.
Speaking about why is the trading conditions nowadays so volatile to Yahoo Finance Newsroom ‘On The Move’, Scaramucci listed some of his concerns; why the repo market’s seizing up its last fall? And, so is why the big banks is having less liquidity?
He explained that a typical electronic trader algorithmically sets prices lower when they see heavy volumes.
“You didn’t have that when you had robust specialist activity on the floor of the exchange or when you had prop desks like Morgan Stanley, Bank of America loaded up with capital prior to the Volcker Rule,” he said.
The veteran investors also mentioned the policy ‘Paul Volcker Rule’ which was named after Former Federal Chief Paul Volcker which prohibits banks from using their own accounts to invest in other investment programs.
“They’re going to say what happened was is we pulled $450 billion of prop capital away from the commercial banks that were regulated by the [Federal Reserve], and that was OK in a zero interest rate environment,” Scaramucci said.
He also added, “But, what it did was it took a tremendous amount of liquidity out of the market of experienced hand-holders. And so, you have no bid.”
n addition, he highlighted a “benign interest rate policy that may or may not last forever,” — taking aim at the Federal Reserve’s accommodative monetary policy amid a $1 trillion-plus federal deficit.
Publicizing his nearly 15-year-old investment firm, Scaramucci said that his firm is focused “mostly in Fixed Income” and he also mentioned that there are literally no equities in the portfolio.
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