Do fundamentals matter in this market?

People are liquidating stocks at any price, because apparently fundamentals don't matter in this environment.

So why did fundamentals matter just 4 weeks ago, when stocks were at all time highs?

Well, they didn't much. All that has really mattered since 2008 is liquidity.

And all people care about right now is how easily an asset can be converted into USD. A 4-point spread on an investment grade bond is not a good look!

I think fundamentals have mattered when it comes to things like relative value within an asset class. But when looking at the stock market broadly, it's all been about liquidity.

The 2009-2020 bull market was born in a monetary crisis. Monetary policy and the provision of liquidity was the required policy response to restore order to markets.

This current crisis is not a monetary crisis. It's a human health crisis which has created a crisis in confidence in short order.

The Fed have done what they can... but that's not the required policy response here.

The S&P 500 got very close to the Dec 18 low last night. Looks like a zone the market will want to retest.

Interestingly, the S&P 500 is only ~200 points away from where it was on Nov 8, 2016 when Trump got elected. Hopefully that helps put the price action of these past 4 weeks into perspective!

Simon Ree is the author of the forthcoming book "The Tao of Trading". He has 25+ years experience with Goldman Sachs and Citibank.