Today, the Fed announced their interest rate decision, which was another cut of 50 bps (or 0.50%).  This means that many (but not all) borrowing rates will likely drop, including those based upon prime. 

The stock market initially welcomed the news of the cut, but by the end of the trading day, stocks were generally lower.

This cut means that the Federal Reserve has cut short-term borrowing rates a total of 1.25% over the past 8 days, which is a clear sign that they are concerned about a weak economy going forward.  Moves of this magnitude by the Fed in such a short period of time are rare. 

Stocks had rallied in anticipation of today's move, but I'm not convinced that now is a good time to buy stocks.  Many firms have announced earnings misses and/or have laid off employees.  In addition, house prices continue to fall, and S&P has downgraded $534 billion more of mortgage-backed securities.  Furthermore, a couple of the municipal bond insurers may lose their AAA credit rating.  If these insurers lose their top-notch credit ratings, it would expose banks and insurers to large losses and even more writedowns.

Hopefully, the economy will turn around soon.  Until there are more blue skies on the horizon, my investment funds will be on the sidelines.

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