Before the Fed’s announcement yesterday that interest policy was unchanged, the markets took off trying to erase the losses sustained earlier in the week.
Some resistance towards the end of the session set in (see chart), and profit taking pulled the indexes off their day’s highs.
The Fed commented that inflation is not a problem at this time since the economy is still bottoming from the recession. For the first time, the Fed also did not say that the economy is contracting, but referred to economic activity as leveling out.
Investors took that as a sign that interest rates are to stay at current levels for some time to come, most likely until next year.
Nevertheless, the major indexes have had a tremendous run, and I would expect more volatility along with some pullback become part of future market activity.
Comments 7
Hi Ulli,
I realize that this blog message was about interest rates, but isn't "Stay The Course" something John Bogle with Vanguard used to say? When it comes to investing we all know what following the advice of that statement has done to portfolios over the last 10 years or so. It would be like the "Titanic" staying the course toward the iceberg and we all know what happened next.
Anon
Ulli,
Looks like that long awaited correction is upon us. I put some RYAIX to protect my longs till the correction seems to be over then switch back to 100% long. No sure that this will work out ok, but I have read the handwriting on the wall for some time now that this correction was coming.
Thanks for your info. that you give us all for free.
Jim
Tsk, tsk, so much pessimism…..
1. This was a fairly typical bear market lasting approximately eighteen months. It did decline about 10% more than average.
2. The government is committed to spending it's way out of the recession. It is staffed by people brighter in the field of economics than anyone reading this blog.
3. Entire new industries will be born, primarily in the midwest, e.g. electric cars.
4. The medical industry will grow through some type of universal health care.
5. All the troops will be out of Iraq totally in two years.
6. The banks are, for the most part solvent. The american automakers have been saved, at least temporarily. The housing market appears to have bottomed.
7. If you think that the loss of two million new jobs is a catastrophe, remember that there are approximately 160 million adults in this country. Even if you consider a quarter of those people to be permenantly retired
(40 million), the recent job losses still account for only ONE out of every SIXTY adults.
I almost forgot……..
8. Tax revenue will increase dramatically. Besides the increase on people earning over 250K, there will be an even larger increase on people earning over 1 million.
9. The Dems will turn the IRS loose on the underground cash economy. Very few of them ever worked in construction, roofing or house painting!
10. With the continued slow recovery in jobs, more and more American youth will see that occupations like plumbing, electrical work, tile setting, masonry, etc. can provide good incomes. As more and more Americans return to these jobs the wages will rise and illegal immigration will slow.
11. The spending stimulus hasn't even started yet. All that money for bridges and road projects will filter down from government to contrators beginning in a few months.
I see 4-5 more years of this bull market at an average gain of 10-12%per year.
Remember, this baby boomer generation is huge, and spans about 15 years. They have had an extremely strong effect on everything they have touched: music, movies, television, Woodstock, the green movement, beach condos, imported beer, wine, BMWs/Mercedes, Japanese cars, health care, the cruise industry, time shares, the dot coms, the real estate boom, etc. If the nations collective conciousness is turned towards locally grown or domestically manufactured products, the effect will be enormous.
The hippy generation is in charge now, and many of them are still socially conscious and truly desire a more even playing field with increased prosperity for all Americans.
Ulli,
Just Chuck must be a young one with very little experience in bear markets, in about 3 more years I would say he will sing a much different tune.
Hagar
Chuck is entitled to his opinion, although there is not one item he mentions that I can agree with. Only time will tell.
Ulli…
Ulli,
Just Chuck must live in la la land or under a rock. I don't agree with anything he has said yet. I have lived thru lots of recessions and bull/bear markets, but it is apparent that he doen't know what he is talking about, sorry Chucky.
Jennifer P.