youngMoney
Rising Member
- Reaction score
- 0
While reading the stock market news I came across a piece of information I found quite interesting. Here is a link to a study dated 9/2007 that directly relates to the Fed rate cut everyone is hoping for http://www.cfainstitute.org/aboutus/press/release/07releases/20070904_01.html
The "Key Empirical Findings" is what I found very interesting. The study states that between 1973 and 2005, returns for a market portfolio averaged 12.0 percent. The return was 17.4 percent in periods following discount rate decreases (expansive monetary policy periods) and 5.3% following rate increases (restrictive monetary policy periods). Thus, returns following discount rate decreases were three times the average return earned following rate increases.
So according to this 33 year study, historically stock do very well after a rate cut. Now I know why everyone is crossing their fingers.
Now the other thing I have read about in the news and on this forum is the subprime crisis. Now I would like some feed back from some of the more savy investors. From what I read, there is a very big credit crisis. I read that there is a real possibility that lenders will be cutting back on loans and offering credit. This will effect how much people spend and ultimately effect the market. My question is, in you all's mind does this subprime crisis offset the "good vibrations" of the impending fed rate cut???
YM
The "Key Empirical Findings" is what I found very interesting. The study states that between 1973 and 2005, returns for a market portfolio averaged 12.0 percent. The return was 17.4 percent in periods following discount rate decreases (expansive monetary policy periods) and 5.3% following rate increases (restrictive monetary policy periods). Thus, returns following discount rate decreases were three times the average return earned following rate increases.
So according to this 33 year study, historically stock do very well after a rate cut. Now I know why everyone is crossing their fingers.
Now the other thing I have read about in the news and on this forum is the subprime crisis. Now I would like some feed back from some of the more savy investors. From what I read, there is a very big credit crisis. I read that there is a real possibility that lenders will be cutting back on loans and offering credit. This will effect how much people spend and ultimately effect the market. My question is, in you all's mind does this subprime crisis offset the "good vibrations" of the impending fed rate cut???
YM
