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Fundamentals too could turn against the dollar. The doomsday fear is that the Fed, in its zeal to head off inflation, will hit the monetary brakes too hard, causing a severe slowdown in the U.S. economy. That frightens away some foreign investment, causing the dollar to drop sharply. Then inflation rises despite the slowdown, prompting the Fed to crack down harder still, and so on around a truly vicious circle...
...predicting nothing here. If the economy is really slowing and Fed Chairman Alan Greenspan stops raising interest rates, the bull market may be coming back to life. But it's way too early to conclude there is a meaningful slowdown. Greenspan will want months of data before he's convinced. We've only had weeks. And bear markets are tricky. Rallies are typical. They prove nothing. Hence my concern...
...weakness, when it looks as if the bottom is falling out, and hold for the long term. That includes blue-chip tech names. Look for companies that will continue to hold up as the economy slows --food and drug stocks, for example. Financial stocks should rally as the Fed stops hiking rates. Face it: sometimes boring is best...
...already gone too far. Tech selling slid the NASDAQ down on the news, and financials did the same to the Dow. Consumers, the heroes of the expansion and the villains of the overheat, are closing their wallets. Have they opened the door to a recession, thanks to the Fed's prodding...
...this slowdown will affect earnings," he said (although investors warmed up again in the afternoon when Greenspan announced that technology -- gasp! -- was good for productivity). "But right now, it doesn't look like any more than the soft landing, from 5 percent growth to about 3.5 percent, that the Fed has been trying to engineer." In fact, says Baumohl, there are some on the Fed's Open Market Committee who feel one more rate hike is still necessary. Greenspan, says Baumohl, is not among them. "There's no sign of any sharp drop-off in economic activity," he says...