In yet another futile attempt to fix a mess which they have long since lost control of, the Fed cut rates for the 12th time in a row last week. Hoping to light a fire under the market and the economy, the “wise old bankers” surprised us with an additional 25 bp slash, above and beyond the expected 25 bp. The market greeted the “good news’ by falling sharply for the next few days. An astute observer could readily conclude that the market isn’t quite as dumb as Uncle Al might have hoped.
There was a time when the market greeted rate cuts with enthusiasm and optimism. But the market has since grown a bit wiser. It has become fairly obvious that when Uncle Al mutters “things are OK and about to get better” while simultaneously cranking on the rate cut lever 12 times in a row, something must have run amuck. There has been a huge disconnect between what the Fed has been saying and what the Fed has been doing. You can fool some of the people some of the time, but you can’t fool the market for two years running.