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Strategies & Market Trends : Recession Investing, Business,& Politics, -- Ignore unavailable to you. Want to Upgrade?

To: richardred who wrote (197)	3/19/2002 1:15:27 PM
From: Alfred W. Post	Read Replies (1) \| Respond to of 247

I wonder and hope someone has the correct answer: Right now most analysts agree on the fact that we have passed the worst and that the economy is improving. The reason for this seems certainly be the effects of the dramatic reduction of interest rates, the strong increase in the money supply and in view of the reduced rate of economic activity with reduced sales, inventory had been reduced which added to a reduction in industrial production. If now the medecin is working and the economy is improving, these inventories have to be built up again. But for this companies need credit and with the increased demand for credit, the price of this comodity like usual will go up meaning interest will start edging up sometime in the not too distant future. And past experiences tell us that an increase in interest rates is bad for the stock market. OR IS IT?? There most likely must be a balancing act with increased economical activity being a plus and an increasse in interest rates being a minus. But when will the plus and the minus be in ballance and at what stage will the minus outperform the plus? If we can call this correctly, than we can act wisely and not emotionaly. In my opinion it might be a good idea to compare the level of interest rates with the grogth in GNP. If this is true, the plus will prevail as long as the interest rates remain lower than the rate of grogth of GNP And the market will really hurt if interest rates are raised to much that they will start putting a break on the economy, causing the calling off of capital expansion. Does anybody has any thoughts along those lines? I think it will be worth worring about it. So lets hear your opinion. Fred