that's fine, but is it safe to assume the fed intends to act in the best long term interests of most americans? high quality analysis has nothing to do with potential biases in their policy
I'm not sure I agree with that. The market is forecasting fed policy with fed fund futures, directly. Bond rates are a function of where cash must sit. Its either bank deposits earning LIBOR or long bonds (which some could argue is a fundamentally bearish bet on equities). Look for readjustment on Weds.
A cut in rate usually is a commitment to a change in trend. I ask myself, why they cut a full 50 basis points back then. Most likely because they want to speed up things and I'd suggest there are more rate cuts at .25 in sight. I would find it odd if they stopped here; it simply wouldn't make sense. They could have cut .25 twice otherwise. Just my 2cts.
I think the original fed cut was done to send a message, not necessarily indicate an accelerating trend of trashing the dollar. credit markets were in crisis. a flight to 90 day bills from money market managers occurred that echoed a move during the 87 market crash. These same markets are simply are not in crisis as we speak.
I think if the Fed holds or cuts rates, fx will be a good trade for a day or longer since the message would be that it's still okay to short the dollar. As would gold. The major indicies might get a short-term bounce for a day or two, but I don't think it'd hold for a longer term.
if you scan the message boards the bearish equity trade stint outnumbers bullish by 8:2 margin. how many traders keep getting the urge to short the indicies...
Interesting. Let's assume that's the case. The dollar and inflation be dammed. The only issue would be to calm equity and credit markets. It would be especially unwise not to cut when the market is certain of .25 cut and even hinting at a .50 cut.