When Does the Fed Cut With the Dow at or near Record Highs?

Wednesday, October 11, 2006 | 12:41 PM

That's been the question I've wondered about for the past few weeks. A large portion of the Bullish thesis is based on the Fed cutting -- despite the Dow being at 52 week and all time highs.

I asked Mike Panzner to whip up one of his excellent charts on the subject, and here's what he came up with:

Over the past 35 years, there have been three occasions when the Fed has begun to ease with the Dow near a 52-week high -- will we soon see a fourth?

Federal Reserve Rate Cuts When Dow is Near High
click for larger chart


***Date and amount of 1st cut***  ***Date and value of 52-week high***   
  1/16/81   20.000% -> 16.000%            1/6/81   1004.69
   6/5/89    9.750% ->  9.625%              6/2/89   2516.90
   7/6/95    6.000% ->  5.75%                6/22/95   4589.64

Wednesday, October 11, 2006 | 12:41 PM | Permalink | Comments (16) | TrackBack (1)
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» The Fed and a Record-High Dow Index from Financial Methods
There have been three times during the last 35 years where the Dow has been at or near record highs (like now) and the Fed has started a rate-cutting campaign. Barry Ritholtz at The Big Picture details the phenomenon in [Read More]

Tracked on Oct 12, 2006 6:06:27 AM


I don't know if I like the idea of the Fed looking at the Dow as a primary factor when making decisions on rate cuts. I think they should be basing their decisions on what the economy is doing and showing some foresight in where it is headed.

The stats and number that the Fed looks at are all historic and lagging as far as I'm concerned. Most of the Fed folks are in ivory towers, senile or both. I think the people at the Fed need to get out there and do the leg work and see the state of things themselves. After all if they raise rates they are not in danger of getting laid off.


Posted by: Dean | Oct 11, 2006 1:26:46 PM

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