Investors may get that extra quarter-point cut before long, but not without more pain first. Fed Chairman Alan Greenspan and crew want to see economic justification for any additional cut. That economic justification may come in the form of declining consumer confidence. The Fed has long maintained that policy actions serve not to directly boost the fortunes of the stock market but rather to ensure a long-term economic environment of sustainable growth and price stability. Propping up the stock market now and risking economic overkill is akin to building a house without a foundation.
Stock prices follow earnings and right now earnings growth is largely negative.
That won't change overnight regardless of what the Fed does with interest rates. To pretend otherwise is using smoke and mirrors. By taking care of the economy first and foremost, the foundation for future growth is being set. An economy that can grow at a sustainable pace is the foundation for growth in consumer spending, corporate revenues, earnings and, ultimately, stock prices in the months and years to come. U.S. Highway 1, North Palm Beach, Fl.