COVID bottom week: Fed unlimited QE, CARES Act passed

The week of March 23-27 2020 marked the bottom of the COVID market panic and the foundation of the most aggressive policy response in US history. Monday March 23 saw the Fed announce unlimited QE and corporate bond purchase facilities. Congress passed the $2.2 trillion CARES Act on Friday March 27, the largest fiscal response in US history. The S&P 500 gained 10.3% on the week, recouping a portion of the 34% peak-to-trough drawdown from February 19.

The Fed's interventions scaled to meet the scale of the market seizure. Primary and Secondary Market Corporate Credit Facilities allowed the Fed to purchase corporate bonds directly for the first time. The Term Asset-Backed Securities Loan Facility supported asset-backed markets. The Commercial Paper Funding Facility stabilized short-term funding markets. Swap lines with foreign central banks addressed global dollar shortage. The breadth of the interventions eliminated tail risk.

The CARES Act provided $2.2T in fiscal support: $293B in direct payments to households, $268B in expanded unemployment insurance, $349B in Paycheck Protection Program small business loans, $500B in corporate support. The combination of monetary and fiscal support engineered an unprecedented V-shaped recovery. By August 2020 the S&P 500 had made new all-time highs, one of the fastest recoveries from a bear market on record.