Beware Periods of Crisis Post Fed
More views on when the Fed stops, via WSJ's MarketBeat:
"David Rosenberg, chief North American economist at Merrill Lynch, goes one point further. He said in an interview that not only do markets display a lackluster performance, but often periods of crisis come shortly after the Fed goes on hold. "If we take a look in the past Fed pauses, they're the periods the arteries tend to harden and financial strains come in," he said.
• The market plunged in October 1987, but the Federal Reserve was on hold by early September, he said. "It wasn't a case where the Fed was tightening on the 16th and the market crashed on the 19th," he said.
• In 2000, strains started to show in the technology sector, but the Nasdaq Composite was virtually flat on the year in mid-2000. The Fed had ended its tightening campaign (six increases in 11 months) in May; the Nasdaq lost more than 40% in the second half of 2000.
• The Fed tightened rates six times in 1994 and once more in early 1995, but the strains on the economy were felt in 1995. GDP growth was 1.1% and 0.7%, respectively, in the first two quarters of 1995, as investors felt the effects of a 30% rise in Treasury yields in the previous year.">
Source:
Post-Fed Strife
David A. Gaffen
WSJ, August 7, 2006 3:04 p.m.
http://online.wsj.com/article/SB115495242802128625.html
Wednesday, August 09, 2006 | 07:00 AM | Permalink
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"but the strains on the economy were felt in 1995"
1995 was a +35% year for $SPX, and up 18% for the first 2 quarters. An anomalous year, with very low oil prices and the tech bubble beginning. Those conditions don't exist today.
Posted by: Craig H | Aug 9, 2006 8:33:29 AM
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