All the markets are awaiting the decision on interest rates from the FOMC next Wednesday. We believe the Fed Chair has backed himself into the corner (with his testimony to congress) and that while lower rates are unnecessary (in my opinion) they will lower the Fed Funds rate by 1/4%.
Purely on a domestic basis the economic numbers continue to look fairly strong. Obviously on a more global basis economies are weakening and Europe remains a never ending basket case – I don’t see that changing for the better anytime soon
Of course when I write on the lowering of the Fed Funds rate I am “talking my book”. It is more palatable to have our money market earning over 2% and not being pushed into more risky assets. In these times of redemptions of preferreds and baby bonds we always seem to end up with excessive cash and we don’t mind waiting for reasonable opportunities while earning 2%–when we are earning 0 on money market there is more urgency to get cash deployed.
Look for all of the markets to remain quiet until next Wednesday afternoon as no one will want to make commitments prior to the interest rate announcement.