Beware Periods of Crisis Post Fed

Wednesday, August 09, 2006 | 07:00 AM

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."

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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 | Comments (22) | TrackBack (0)
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Comments

"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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