Our economy has weathered the recent 50% increase in gasoline prices without much of a hiccup. With fuel prices seamingly pulling back, a large % of Amercian consumers will now feel less of a bind than they have over the past year. I don’t care about the idiots with resetting I/O loans. Those folks never had a dime in the stock market or savings to begin with. They’ll simply BK before they curtail their consumption.
If the Fed doesn’t raise rates above the current level, I do not believe we will see a recession by Q4 ’07, let alone Q1. If rates go any higher, the stock market will suffer as fixed return investments simply get too enticing (they already are as far as I’m concerned). I think the dollar seems to be holding on to its value well enough for the FED to hold at a level that still encourages U.S. stock market investment. IMO, that’s why we’ve had a solid August, not because fool’s money is pouring in.
