(October 15) – Don’t expect the
U.S. Federal Reserve Board to do
anything to stop the slide in
stocks, says CIBC World Markets.
With the Dow Jones industrial
average closing in on 10,000
points, some traders are wondering
whether the Fed will begin
loosening the purse strings again
like it did when the market
faltered last year.
Avery Shenfeld, CIBC World Markets
economist, says no. While the market has declined
appreciably in recent days,
resulting in an S&P that is flat in
the year-to-date period, the market
would have to go a lot lower before
it began worrying the Fed. He
argues that consumer spending
doesn’t change in response to
short-term market moves. Instead,
it reacts to wealth creation or
destruction over a long period of
time. And since many people are
sitting on huge gains since 1995
Shenfeld says he doesn’t expect
the current slide to much matter
to the Fed.
The situation in 1998 was
fundamentally different, he says,
because the stock market drops
occurred against the background
of the Asian flu, and some basic
destabilization in global capital
markets.
IE Staff
For more please see: