More views on when the Fed stops, via WSJ’s MarketBeat:
"David Rosenberg, chief North American economist at Merrill Lynch, goes one point
further. He said in an interview that not only do markets display a lackluster
performance, but often periods of crisis come shortly after the Fed goes on
hold. "If we take a look in the past Fed pauses, they’re the periods the
arteries tend to harden and financial strains come in," he said.
• The market plunged in October 1987,
but the Federal Reserve was on hold by early September, he said. "It wasn’t a
case where the Fed was tightening on the 16th and the market crashed on the
19th," he said.
• In 2000, strains started to show in the technology sector,
but the Nasdaq Composite was virtually flat on the year in mid-2000. The Fed had
ended its tightening campaign (six increases in 11 months) in May; the Nasdaq
lost more than 40% in the second half of 2000.
• The Fed
tightened rates six times in 1994 and once more in early 1995, but the strains
on the economy were felt in 1995. GDP growth was 1.1% and 0.7%, respectively, in
the first two quarters of 1995, as investors felt the effects of a 30% rise in
Treasury yields in the previous year."
David A. Gaffen
WSJ, August 7, 2006 3:04 p.m.