Market Analysis

The Fed decreased both their funds rate by .50% and their discount rate by .50%.  The stock market initially reacted as expected by rallying and the bond market worsened (rates increasing).  By the end of the day, though, the stock market gave up its gains and the bond market ended relatively flat.   Be very careful with your floating loan positions as it could be that this is the calm before the storm.  There is a ton of money on the sidelines waiting to jump into the stock market.  Discussion of overvalued Treasuries (prices too high and yields too low) are now common in the financial press.  To play the opposite card, there are those who think that the US economy is on a track towards continued slowing growth or recession for the foreseeable future given national problems with the real estate market and its impact on consumer's pocketbooks because they can no longer tap into ever increasing lines of credit to support their spending habits.  The 4th quarter's weak GDP #s, if not revised upward, does point to a significant slowdown.   If ADP's report today projecting very strong January employment growth proves incorrect and non farm payroll growth is weaker than expected in January and, if inflation can remain tame, there may be room for lower rates. 
Posted by Matthew Breston on January 30th, 2008 5:57 PMPost a Comment (0)
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