May 15, 2001
It Don't Mean A Thing If The Market Don't Swing
In a sure sign that the bear market bounce has petered out, the Fed's 50-basis-point slashing of interest rates today failed to spark any reaction. Yet again, investors have shrugged off the Fed's attempt to rally the troops. And with good reason!
Businesses are already hunkered down in the corner, waiting for the next economic downturn to hit. They've stopped making investments in new technology, research, and expansion. Instead, they're laying off hundreds of thousands of employees. But in their haste to improve their bottom lines, they've failed to realize that those laid off employees are going to come back to haunt them in the form of lower earnings. Despite slight upticks in retail sales and consumer confidence, skyrocketing oil and energy prices coupled with mounting layoffs will cripple the economy. As unemployment fears become reality, consumers will inevitably rein in spending. That means further slowdown is ahead for most sectors.
The Fed even admits that the economy is headed toward further slowdown. No investor is going to feel confident that the market has reached bottom if the Fed still sees tougher times ahead. The Fed can't turn the economy around singlehandedly -- it's far too little and far too late.
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