|
September 28, 2007
Quick Take: September 2007
Leading into September fear was in the air. How many more hedge funds were about to blow-up? Would a major Wall Street firm implode? Why was everyone at Jackson Hole so pessimistic? Was the monthly decline in payrolls the start of a new trend?
But alas, with peopled lined up outside Northern Rock branches waiting to take all their money out and major Wall Street deals dying on a daily basis, the Fed cut interest rates by 50 bps on September 18 and everything turned our alright….
With investor’s largely ignoring what was a terrible month of economic news – a month that raised the odds of a U.S. recession - a quote yesterday from AP helps sum up the action in equities:
“Stocks rose modestly Thursday as investors bet that a steep decline in August new home sales will give the Federal Reserve another reason to cut interest rates.”
Another quote, this time from Oakbrook’s Janna Sampson, also helps set the stage for what should be an interesting October:
“A second Fed cut will go a long way in reassuring the stock market that the worst is over.”
Yes, we are in one of those strange periods when people think that things will be ugly enough to warrant another Fed cut, but not ugly enough to actually spark a major correction in stocks. Apparently everyone forgets that during the Fed’s last rate cutting effort it took almost three years for equities to form some semblance of a bottom (and back then Greenspan didn’t have to worry about surging gold prices and/or a plunging dollar). Point being, have recessions and bear markets really been eradicated simply because Bernanke has proven to be equally if not more aggressive at cutting rates than even Greenspan?
With Todd and I focused on next weeks quarterly Wish List, it is worth being be brief: I still think that economic recessions and stock market corrections exist, and the events of September 2007 did little to contradict the theory that the onset of both could be imminent. |
