Everything you need to know about the stock market amid fears related to coronaviruses

Last week, Wall Street experienced its worst crash since the start of the financial crisis in 2007. But on Monday, stock prices rose sharply, hoping that central banks around the world would come to the rescue.

Here are the answers to some of the questions you haven't asked.

What is the most disturbing part of last week's stock market liquidation, which cost investors over $ 4 trillion in assets?

The biggest concern is that investors are not used to falling stock prices. And it is the fault of the Federal Reserve, which for the past decade has forced people to put their money into stocks by maintaining unattractive interest rates.

The Fed therefore created a bubble.

And the bubbles are wonderful until they burst. And then, the people most affected are usually small investors who couldn't get their money out of the market on time.

Should people have seen this happen?

A small number of people saw it coming, those who were not caught up by the quick money being made in the market.

Normal stock markets just don't behave like this behaved. It was overpriced by any measure. And it was clear that the market was ignoring very many warning signs like trade wars, political chaos in the United States, bad economies in other parts of the world and international tensions.

And too much debt. The world is drowning in indebted countries like the United States, behaving with no fiscal responsibility. Neither do consumers.

But it was something that no one expected what caused last week a coronavirus fear crash?

It is always something unexpected that causes panic. In 2007, it was the fact that millions of people could not pay their mortgages and had created a financial crisis in the banks.

But once the unexpected thing starts to drop the market, everything else worrying is also flirted.

The biggest problem these days is that certain market forces of computer traders, for example, can keep stock prices unreasonably high simply by buying stocks. There should be no logic behind the purchases.

And when there is no logic, stock prices will eventually come back down to Earth.

Take last Friday, for example. Dow Jones' industry average increased by about 600 points in the past trading hour. Why? Because it was the end of the month and professional fund managers were trying to save the face of their clients. So they pushed stocks up.

Did Fed chairman Jerome Powell help the market last Friday by indicating that he was ready to cut interest rates?

Yes, Powell helped. But it only helped a few minutes. Then, before the last trading hour, the stocks fell again. And it is only because professional traders need the market to go up that Friday losses have been reduced to just miserable or disastrous.

The problem with the market today is simple. No one knows how much the virus will spread and how much it will harm the global economy.

If American companies cannot obtain products and supplies from other countries and if they cannot sell their products worldwide due to restrictions imposed because of the virus, profits will suffer.

And the Fed and other central banks around the world can cut interest rates as much as they want and that won't help. The rate cuts will not get rid of the virus and the problems it causes.

If the Fed announced that it would give free money to researchers looking for a cure for viruses, it might be worth it.

Do you think the Fed will cut interest rates?

Absolutely. In fact, there could be rate cuts before this column is even printed.

And when rate cuts happen between Fed meetings, like a drop now, it would be both exciting and worrisome in the financial markets.

Exciting because the Fed and the other central banks are at work. Worried because they wouldn't make the cuts unless they thought something was really wrong.

But here's the problem. Because of what the stock market has just done, everyone expects the Fed to cut rates and do it aggressively. And when everyone expects something, it has less impact on the stock market.

Aside from trying to help the stock market, is there any justification for the interest rate cuts?

Not really. The economy seems to be doing well. Thanks to all of this, the Atlanta Federal Reserve's PIBNow forecast grew the US economy at an annual rate of 2.7% in the first quarter.

It'll probably go down. And some Wall Street companies predict that growth will be wiped out by the virus and that companies will not report any profit gains for the year.

So here's the problem: if the Fed cuts rates now, it will be able to cut them less later in the year, while cheaper borrowing costs could actually help businesses grow.

It’s like basketball. When you use all of your timeouts at the start of the game, you won't have them later when you really need them.