I guess it depends if we go into a true recession. The historical record shows that the average decline in the S&P 500 is 34 percent and the average duration is 37 weeks. Using that as a metric, what is 34% off of 14000……….9200. I mean we really can go into a recession here (they do happen)….they usually do start out of some kind of turmoil in the credit markets. And buddy have we got some turmoil in the credit markets.
This is an interesting read about how nuttered our FED really is in this mess
“Banks are slashing lines of credit, paring back trading positions and refusing to roll over commercial-paper obligations because they must husband their cash. That is why a 50-basis-point cut or a 400-basis-point reduction in Fed Funds will not do anything to restore confidence. It is also the reason the markets will panic the day after the Fed’s hand is forced on September 18, when they realize that financial institutions will still be unable to move the collateralized derivative structures off their books.”
I happen to agree with that statement. There is going to be a huge build up to a Fed Funds Rate Cut and it will do absolutely nothing to unfreeze the derivatives market. The market will react to the fact that our FED really has very limited power over this situation. Time will tell.
