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Another Fed cut, another boost for stocks?

snigletsniglet
edited November 2007 in The Economy
The Fed is signaling that it might lower interest rates yet again in December, and the markets are taking the news with great enthusiasm (witness the rally we've seen already this week).

http://www.bloomberg.com/apps/news?pid=20601087&sid=aC5q6KuTN0Vo&refer=home

I guess rate cuts must be good for stocks, and the economy. Hmmm... But why is it that the Fed rate cuts that started in January 2001 didn't stop the stock markets from crashing by over 50% in the next 2 years? And if Fed rate cuts were so bullish why have stocks tanked after the last two Fed cuts this year?

Sarcasm aside, history seems to show that the Fed only cuts rates when it's clear there is economic turbulence ahead. The time to sell stocks is when you see the Fed cutting rates, buy when they start raising them.

Comments

  • lamontlamont
    yeah, although its not surprising that stocks have rebounded. the indexes were sitting around their 200-DMAs looking for a reason to rally after being oversold... the headlines claiming why the stock market is moving on any given day are usually about 80% bunk...
  • rose-colored-coolaidrose-colored-coolaid
    The stock market moves are mostly based on computerized trading. The ticker tries to rationalize this with some explanation, but the real logic is probably stored in a format people can't understand. It's interesting to me that the economics which twenty years ago could be used to profit now defines what the market will do, because it's been codified.
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