If there is indeed a bubble outside of the stock market, then the dollar will run into trouble. The ongoing profit woes from chemicals to hamburgers inspires little confidence in that respect.
For now, the bond market still seems the place to be. Stocks are still dealing with overzealous earnings expectations for 2002, but energy prices are falling, tax checks are in the mail, and the fed is lowering interest rates. The economic recovery is the light at the end of the tunnel that market participants appeared focused on. It might turn out to be an oncoming train.
"This year, however, the overall stock market has remained flat to down by most measures. Long-term interest rates have not fallen. Against some currencies, the dollar has actually shot up in value, inhibiting efforts by companies to offset weakness in their sales at home by selling more of their goods abroad.
"'Normally when you have this kind of easing, you would get more help from stocks, bonds and the currency,' said William C. Dudley of Goldman, Sachs. 'In this case, the stock market's gone down, the dollar has appreciated and bond yields are little changed. What it tells you is that it's not reasonable to expect a big lift from monetary policy.' " |
