Comments on: Is Fed Easing Actually Good for the Market? http://blog.afraidtotrade.com/is-fed-easing-actually-good-for-the-market/ Helping traders overcome fears and emotions in trading Thu, 09 Feb 2012 14:53:15 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: The 10-Year Relationship Between the SP500 and Fed Funds Rate | Afraid to Trade.com Blog http://blog.afraidtotrade.com/is-fed-easing-actually-good-for-the-market/comment-page-1/#comment-213588 The 10-Year Relationship Between the SP500 and Fed Funds Rate | Afraid to Trade.com Blog Thu, 29 Apr 2010 15:49:18 +0000 http://blog.afraidtotrade.com/is-fed-easing-actually-good-for-the-market/#comment-213588 [...] “Is Fed Rate Easing Really Good for the Market?” [...] [...] “Is Fed Rate Easing Really Good for the Market?” [...]

]]> By: A Look at the Yield Curve at Market Tops and Bottoms | Penny Stock Trading System Blog http://blog.afraidtotrade.com/is-fed-easing-actually-good-for-the-market/comment-page-1/#comment-211753 A Look at the Yield Curve at Market Tops and Bottoms | Penny Stock Trading System Blog Mon, 28 Dec 2009 05:20:43 +0000 http://blog.afraidtotrade.com/is-fed-easing-actually-good-for-the-market/#comment-211753 [...] February 18, 2008:  Is Fed Easing Actually Good for the Market? [...] [...] February 18, 2008:  Is Fed Easing Actually Good for the Market? [...]

]]> By: A Look at the Yield Curve at Market Tops and Bottoms | Afraid to Trade.com Blog http://blog.afraidtotrade.com/is-fed-easing-actually-good-for-the-market/comment-page-1/#comment-211751 A Look at the Yield Curve at Market Tops and Bottoms | Afraid to Trade.com Blog Mon, 28 Dec 2009 00:34:39 +0000 http://blog.afraidtotrade.com/is-fed-easing-actually-good-for-the-market/#comment-211751 [...] February 18, 2008:  Is Fed Easing Actually Good for the Market? [...] [...] February 18, 2008:  Is Fed Easing Actually Good for the Market? [...]

]]> By: Corey Rosenbloom http://blog.afraidtotrade.com/is-fed-easing-actually-good-for-the-market/comment-page-1/#comment-34095 Corey Rosenbloom Tue, 19 Feb 2008 18:51:59 +0000 http://blog.afraidtotrade.com/is-fed-easing-actually-good-for-the-market/#comment-34095 John, If you bought bonds the day the Fed slashed rates, your bond portfolio would be up around 7% - 10% (not to mention the six months of interest payments), while your stock portfolio would be down possibly greater than 7 - 10%. See my post today (Feb 19, 2008) for a relative performance chart between the two. Recall that the Fed can only control overnight interest rates - not the 30 year rate directly. Also, recall that bond prices react to a whole other set of variables, including inflation rates/perceptions and perceived economic conditions. Rate cuts have spiked inflation, and bonds also may be forecasting an economic recovery (hence their price decline) as yields have slowly pushed up over the last few weeks. John,

If you bought bonds the day the Fed slashed rates, your bond portfolio would be up around 7% – 10% (not to mention the six months of interest payments), while your stock portfolio would be down possibly greater than 7 – 10%. See my post today (Feb 19, 2008) for a relative performance chart between the two.

Recall that the Fed can only control overnight interest rates – not the 30 year rate directly. Also, recall that bond prices react to a whole other set of variables, including inflation rates/perceptions and perceived economic conditions. Rate cuts have spiked inflation, and bonds also may be forecasting an economic recovery (hence their price decline) as yields have slowly pushed up over the last few weeks.

]]> By: Corey Rosenbloom http://blog.afraidtotrade.com/is-fed-easing-actually-good-for-the-market/comment-page-1/#comment-34094 Corey Rosenbloom Tue, 19 Feb 2008 18:49:13 +0000 http://blog.afraidtotrade.com/is-fed-easing-actually-good-for-the-market/#comment-34094 Andrew, Thank you. That's an excellent question. In the past, the Fed reacted to the economy moreso and now it seems like the Fed (Bernanke especially) is a bit more reactive to the market. It was not a coincidence that the day the stock market was set to open up 5% down the day after global markets fell as much as 7% that the Fed surprised Wall Street with the biggest cut in 25 years. Wall Street seems to be like a crying baby begging for more candy, and when you give it more, it wants more still. Of course, the market does react to the Fed, but if the market doesn't get what it wants from the Fed (if it wanted a .50 cut and got a .25 cut), then it will sell off. Of course, unexpected positive surprises often result in upward swings as well. It's a 'conundrum.' Andrew,

Thank you.

That’s an excellent question. In the past, the Fed reacted to the economy moreso and now it seems like the Fed (Bernanke especially) is a bit more reactive to the market. It was not a coincidence that the day the stock market was set to open up 5% down the day after global markets fell as much as 7% that the Fed surprised Wall Street with the biggest cut in 25 years. Wall Street seems to be like a crying baby begging for more candy, and when you give it more, it wants more still.

Of course, the market does react to the Fed, but if the market doesn’t get what it wants from the Fed (if it wanted a .50 cut and got a .25 cut), then it will sell off. Of course, unexpected positive surprises often result in upward swings as well.

It’s a ‘conundrum.’

]]> By: Is Fed Easing Actually Good for the Market? · Poor Credit News http://blog.afraidtotrade.com/is-fed-easing-actually-good-for-the-market/comment-page-1/#comment-33816 Is Fed Easing Actually Good for the Market? · Poor Credit News Tue, 19 Feb 2008 06:21:50 +0000 http://blog.afraidtotrade.com/is-fed-easing-actually-good-for-the-market/#comment-33816 [...] Corey Rosenbloom wrote an interesting post today onHere’s a quick excerptWith lower cost of carry rates and lower interest payments, companies can take on more loans and expand their business, as well as the consumer can purchase more items (including bigger purchases like houses and cars) on credit or loans … [...] [...] Corey Rosenbloom wrote an interesting post today onHere’s a quick excerptWith lower cost of carry rates and lower interest payments, companies can take on more loans and expand their business, as well as the consumer can purchase more items (including bigger purchases like houses and cars) on credit or loans … [...]

]]> By: John http://blog.afraidtotrade.com/is-fed-easing-actually-good-for-the-market/comment-page-1/#comment-33542 John Mon, 18 Feb 2008 22:08:44 +0000 http://blog.afraidtotrade.com/is-fed-easing-actually-good-for-the-market/#comment-33542 Buy bonds hasn't quite worked this time around -- at least with the long bond. It's been selling off since the last rate cut. Buy bonds hasn’t quite worked this time around — at least with the long bond. It’s been selling off since the last rate cut.

]]> By: Stock Market » Is Fed Easing Actually Good for the Market? http://blog.afraidtotrade.com/is-fed-easing-actually-good-for-the-market/comment-page-1/#comment-33451 Stock Market » Is Fed Easing Actually Good for the Market? Mon, 18 Feb 2008 17:52:53 +0000 http://blog.afraidtotrade.com/is-fed-easing-actually-good-for-the-market/#comment-33451 [...] Corey Rosenbloom wrote an interesting post today on Is Fed Easing Actually Good for the Market?Here’s a quick excerptMichael Panzer of Financial Armageddon recently asked this question, as well as provided an excellent graph detailing stock market returns and Federal Funds rate at his post “Is Aggressive Fed Easing Really Bullish for Stocks?” … [...] [...] Corey Rosenbloom wrote an interesting post today on Is Fed Easing Actually Good for the Market?Here’s a quick excerptMichael Panzer of Financial Armageddon recently asked this question, as well as provided an excellent graph detailing stock market returns and Federal Funds rate at his post “Is Aggressive Fed Easing Really Bullish for Stocks?” … [...]

]]> By: Andrew Palladino http://blog.afraidtotrade.com/is-fed-easing-actually-good-for-the-market/comment-page-1/#comment-33439 Andrew Palladino Mon, 18 Feb 2008 17:09:21 +0000 http://blog.afraidtotrade.com/is-fed-easing-actually-good-for-the-market/#comment-33439 Very interesting post!! The question here is whether the Fed is reacting to the market , or the market is reacting to the Fed? Very interesting post!!

The question here is whether the Fed is reacting to the market , or the market is reacting to the Fed?

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