Jerry Welch, Commodity Insite!
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Below is a chapter from my book, Haunted By Markets entitled, Fed On Mission To Lower Rates I penned on November 10, 1998. I decided to reprint it here because of the collapse underway with Treasury bonds and the implications such a scenario hold for stocks and commodities. I hope you find something of interest in the information below.
November 10, 1998:
Fed On Mission To Lower Rates
The markets that never ceases to amaze me are the U.S. equity markets. They have been on the rise since August 1982 (yes, 1982) and since, have never had a meaningful set-back. When they do set-back the break doesn’t last long. It is a perfect market for true believers.
Take the most recent break in the equity markets, for instance. On September 1, the Dow fell to 7400 after rising to a historic high on July 20, at 9367. In essence, the Dow fell 1967 points or 26 percent in the short space of six weeks.
The Dow was pounded lower as fears that the Asian Crisis would push the U.S. economy into a recession. But in early October, Fed Chairman Greenspan lowered interest rates not once, but twice, to keep U.S. economy from succumbing to the same bearish forces hampering all other world equity markets. As a result of lower interest rates, the Dow Jones staged a monster rally with prices rising back to 8990, a high last seen on July 31. The Dow rose 1590 points.
The S&P 500 was exceptionally volatile during this period since it did not hit a low until October 8, as opposed to the low the Dow that was hit on September 1. From the low set