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Strategies & Market Trends : Currencies and the Global Capital Markets

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To: Mike M2 who wrote (937)	10/27/1998 11:53:00 AM
From: Henry Volquardsen	Read Replies (1) of 3536

William, I don't believe it was the Fed's direct objective to manipulate the stock market. What the person writing that post fails to mention was that the stock market was already up over 100 points that day before the rate cut and had been rallying for several days. What he also misses is a focus on the bond markets. The Fed followed its initial cut by injecting liquidity into the system. Their stated objective was to prevent a credit crunch. Despite this credit spreads continued to widen and the crunch was tightening. The added liquidity was going into equities not credit instruments. This is what caused Greenspan to panic and call for another quick rate cut. The poster you are referring to is, I believe, making the mistake of looking at only one sector of the market and not the capital markets as a whole. Henry

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