Word: feds
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...Fed heads into its May confab Tuesday, the economy's prospects for dodging a recession are actually looking pretty good. On Friday, encouraging reports for April on retail sales (up), consumer sentiment (up) and wholesale inflation (pretty tame) put a dent in the unanimous expectation that the Fed heads would chop another 50 basis points, or a half-point, off the short-term interest rate that is the Fed's raison d'etre. Theoretically, Fed cuts take 6-18 months to work their magic in the economy (though the stock market "wealth effect" has in recent years been credited with...
...other companies, are paring costs (and payrolls) and waiting for business to pick back up. Investors, while starting to trickle back in on what they hope will be the new ground floor, are mostly waiting for, well, for business to pick back up. And everyone's waiting for the Fed's four (going on five) rate cuts to work their magic, both on Wall Street and Main Street alike...
...there's a consensus on anything, it's that Greenspan's aggressive easing will work - eventually. The Fed always wins in the end, and because of that there's cause for the Fed to worry that another 50-point cut Tuesday will be someday determined to have been overkill - just like the 50-point hike that Greenspan laid on us a year ago this month. And with Friday's news so heartening, there's a possibility Greenspan will send a vote of economic confidence with a 25-point, everything's-gonna-be-alright cut. (Even though Wall Street would immediately...
...anything about creeping unemployment, and as it does some wallets - those belonging to the actual unemployed - will inevitably close. But he can keep up the spirits of those who are still working - and facing a summer of stifling energy prices - and send them the message that the Fed is trying, trying its hardest, to avert a recession, and the Fed always wins...
...Since 1928, stocks in the S&P 500 have been up an average of 15 percent 6 months after the Fed's first rate cut, and another 19 percent a year later. The Fed always wins in the end. But the next couple of months - and a large portion of Greenspan's legacy - are still up for grabs...