| Bonds will drop. This will create money, which has to go somewhere. I think it is likely that $ will flow into stocks again, before they drop further, so SP may indeed see 1050 before it sees 500. This depends entirely on psychology, since the economy adjustments are slow. We'll see higher rates, and the economy will get a bit better, before people stop refinancing their homes and spending at all. We'll see - stocks may, of course, drop right away, but as bond holders get scared of the lower dollar and low yields, I think some of them will get back into stocks, enough to create a rally. Unless, of course, the dollar really starts going down the drain. I think there will be a lot of attempts to support it. |
