Waiting for the Fed
Posted by Sean Hannon
December 10, 2007 at 8:33 am
    In Waiting for Godot, two characters, Vladimir and Estragon, spend their time waiting for an all-powerful beings arrival. Their hope is that when Godot finally comes he will guide them on the steps they need to take in their lives. Since all prior attempts to determine direction have been futile and fruitless, Vladimir and Estragon pray that Godot’s arrival will solve all problems.
    What is the relevance beyond the fact that I took too many literature classes in college? Simply, the market is in the same place. After breaking to new lows in November, the markets have seen a dramatic two week recovery that has moved us above the 50 day moving average. From all looks, the bulls have resumed control of the market and prepared for a year end rally. Or was this a dead count bounce that the bears are using to trap people in the market? If we only had an answer.
    So we find ourselves waiting for the Fed. Tomorrow’s meeting should serve as the catalyst that determines the market’s reaction for the remainder of the year. A well received decision will allow us to test the market highs. A poorly received decision sets the table for a drop to new lows. Like Vladimir and Estragon we await the decision on how to proceed. Let’s hope that our fate is better than theirs.
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The question is, a quarter point or half point?
I think it is a half point.
hopefully this isn’t a bear trap
Quarter point. Economy’s not as bad as some people think it is. Jobs are holding steady and oil doesn’t seem to be spiking as bad as it was a few weeks ago.
I was thinking half-point at first, but like Jorge says, the economy doesn’t seem to be as bad as people feared. Jobs report really confirmed that. Now I’m leaning to quarter-point.
I think the real question is: has the market already priced in most of the gains based on a quarter-point cut? It’ll be interesting to see the market’s reaction to whatever Santa Bernanke says.
I think a quarter point is the most likely solution. The market will likely move lower, but by how much it is hard to tell. The statement about future interest rate moves will always be very closely watched for any potential changes.
Well according to Cramer, this gives him the full point in Fed cuts he needed this year for the Dow to reach 14,400 or whatever his target is. A quarter point was baked into the market last week on the monster rally. What might be interesting, however, is if the discount rate is cut by a half point. I’m not sure how the market would react to that but it’s food for thought.