About the Fed. It would appear that many are now coming to the same conclusion I did several months ago, that the Fed's actions are out of proportion to the actual, rather than perceived, economic problems (of which there are few). And that their actions, with few checks and balances by the executive and legislative branches, has placed the free market system under their thumb. And this goes for the upside as well as the downside. The Naz's bubble was itself the result of excess monetary inflows by the Fed for the Asian rescue and Y2K, and market imbalances created by rising interest rates. At first all indices went up but, as rates began to rise, sector by sector began to fall, beginning with the old economy. Many of these sectors have been in a bear market for a year, and the Naz is just joining the crowd. At the end, investors began chasing the only thing that was working at the time, leading to momentum investing. That's when we saw the Naz going higher and higher from the flimsiest and most speculative of companies, not from the G&Ks.
FWIW, with the recent crash the Naz is now back to the levels conmensurate with the S&P and Dow before its divergence began. Small comfort, but this means that any further major downside by the Naz should not happen without the S&P and Dow also dropping proportionately. The Naz may drop more, perhaps as far as 2900, but the total meltdown being predicted by the permabears ain't gonna happen. The houses, the Fed, and Treasury won't let it happen.
I foresee a couple more rate hikes, and the market going sideways for a couple of quarters before strengthening late this year or early next year as the Fed begins to reverse its course. By then we should be in a recession, but the market will be a leading indicator and begin rising even while the economy is struggling. Just another boom bust cycle.
BWDIK |
