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Why was the U.S. Federal Reserve’s action unable to calm the stock market?

In a dramatic move reminiscent of the 2008 financial crisis, the Fed cut its key interest rate to near zero yesterday to counteract the negative effect of the Coronavirus pandemic. The Fed was attempting to cushion the risk to the global economy and to quickly stop the public’s panic in order to rebuild the trust in the government’s ability to safeguard the population’s health and well-being.

While the first objective is geared towards the actual business environment, the second is purely targeting the public’s emotions.

Did the action have the intended effect in bringing back the public’s trust? The announcement was made on Sunday evening and Cognovi Lab’s EMOTION AI platform immediately tracked a significant increase in chatter via social media and web conversations.

Cognovi EMOTION AI then identified and extracted the primary emotions in real time and translated them into an Emotional Intensity score to reflect the public’s emotional trust towards the Fed’s action.

Cognovi’s Emotional Intensity score showed the Fed’s action was of little consequence. The public did not emotionally care, as we indicated yesterday night, 15 hours before the US capital markets opened today. A day that saw the Dow drop by 3,000 points.


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