IMO, there may be a quick pop in the markets when the
Fed lowers rates. But this will fade (as the January rally did), and the lows will be retested, or maybe new lows set. The earliest that the lower rates can have an effect on the real economy, will be July (6 months later). And, remember the order of events. First, the lower interest rates make businesses and consumers, at the margin, more likely to build and spend and consume. Then, the effect trickles upward, from WCOM to CSCO to TXN, and (finally) to AMAT. CSCO and AMAT won't get more business, until companies closer to the end-user see business getting better. The earliest that consumer spending could pick up is July. That's when "visibility" may improve. CSCO and AMAT may have sustainable rallies then, in anticipation of business getting better later. Until at least summer, inventories at chip companies (and everything made out of chips) is not going to come into balance with supply. How can it? Supply isn't going to decline, in this industry with huge fixed costs and 2 or 3-year lead times for fabs. And demand isn't going to pick up before July. |
