June 27, 2008
Jan 21-22: Fed holds unscheduled meeting and lowers its target for the federal funds rate 75 basis points to 3-1/2 percent. Press Release
Mar 7: Fed ‘announced two initiatives to address heightened liquidity pressures in term funding markets.’ PR
Mar 11: Joins other central banks in an attempt to address liquidity pressures. PR
Mar 14: Helps JPM bailout Bear Stearns. PR - JPM
Mar 16: Fed meets and announces policy actions on a Sunday. PR
Mar 18: Fed cuts federal funds rate 75 basis points to 2-1/4 percent. PR
For the record, the S&P 500 has not entered a bear market on a closing basis and has only hit the -20% mark once since the current downturn began. This may soon be about to change…
On the recession
The average peak to trough length of the 31-recessionary cycles since 1854 is 17 months. The last two U.S. recessions, in 1991 and 2001, each lasted all of 8-months. To put these numbers in perspective, it has been 212 months – or almost 18-years – since the U.S. has been in what would qualify as your ‘average’ recession. With this in mind, why with U.S. home prices crashing and energy prices skyrocketing do some analysts believe that today’s recession (which may or may not be all of 6-months old) will soon end?
Stay on the run
For the first time in nearly 18-years the U.S. is probably in, at the minimum, your average recession. If history holds, the U.S. consumer will save a few more dollars during the recession, more jobs will be lost, and, perhaps most importantly, U.S. stocks will sustain bear market losses. In other words, if you thought the last 10-months were scary, you may want to close your eyes…
Incidentally, the one time the Fed did not act when the S&P 500 came within 2% of hitting an intraday bear market was yesterday.