TimingEquity

[teabull]

The US equity markets continue to grovel for, at least, a short-term bottom around current levels. With the US Federal Reserve expected to cut the Fed Funds and Discount Rates by an additional 50 basis points this coming Wednesday, the stock markets will have been fully lubricated with 125 basis points of easing in just over one week. This amplitude of liquidity into the financial system cannot be easily ignored. We would suggest that the Fed’s main impetus for such a dramatic lowering of interest rates is in an attempt to allow the yield curve to quickly steepen. This would allow the major lending institutions to begin making significant amounts of money by borrowing short and lending long once again. However, as the yield curve steepens, stock valuations come in to question, as the yield on long-term bonds then become an attractive investment alternative for Asset Allocation managers at the expense of investing in the stock market.

Sincerely,

Anthony Waller
President
Teabull Asset Timer Ltd
http://www.timingequity.com