NDAQ:VIAVV - Post by User
Post by
fmkapon Jan 12, 2001 2:00pm
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Post# 3116228
MARKET OUTLOOK...............................
MARKET OUTLOOK...............................MARKET OUTLOOK
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THE FED TO THE RESCUE
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Rate cut paves the way for market rebound.
The U.S. stock market is still grappling with the economic and corporate
earnings slowdown likely to unfold in the months ahead. The good news is that
the Federal Reserve Board (the "Fed") is becoming increasingly concerned with
this slowdown and, in a move designed to stimulate economic growth, cut rates by
half a percentage point on Jan. 3.
In light of the economic slowdown, many observers expected the Fed to announce a
rate cut at its next regularly scheduled meeting in late January. The fact that
the Fed announced the cut ahead of its meeting shows how seriously it regards
the U.S. slowdown. In addition, the cut was more aggressive than usual - the
Fed's chairman, Alan Greenspan, has typically started a series of rate cuts with
an initial quarter-point cut.
What does this mean to the stock market?
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Stock markets rallied after the Fed's surprise move, but will this be
sustainable? If history is any guide, then the Fed's rate cut could pave the way
for a sustained stock market rebound. Whenever the Fed has cut rates in a
non-recessionary environment, the Standard & Poor's 500 Index has been up every
time after three, six and nine months - and 83% of the time after a year. The
Toronto Stock Exchange 300 Index has been up 83% of the time after three months
and every time after six and nine months. After a year, the TSE 300 has been up
83% of the time.