Last month, I predicted that the Federal Reserve would cut short-term interest rates a quarter of a point by February. Instead, wily old Alan Greenspan sprang an even glitzier New Year s present on the markets by slashing half a point off banks cost of funds in early January. Big deal, say the skeptics. We hear the same shortsighted complaint at the start of almost every great rise in the stock market. As yields tumble, a portion of this hot money invariably finds its way into the stock market.
Share prices bounce.
The Fed probably isn t finished. Maestro Greenspan has ample leeway to trim rates as far as necessary to keep the business expansion afloat. Now that Alan G. has shown his hand, I m upgrading my market forecast for 2001. What s more, I consider those levels to be lowball estimates. In the early stages of a new bull market, some of the biggest gains pile up in stocks that got whacked during the last bear market.