Kass: Why the Market Doesn't Rally
This blog post originally appeared on RealMoney Silver on June 26 at 7:39 a.m. EDT.
The FOMC statement, suggesting that the Federal Reserve is in no hurry to tighten, led to a rally in all maturities along the Treasury yield curve as the U.S. dollar dropped modestly. But U.S. equities disappointed again yesterday -- and they're not looking so hot today.
Under most conditions, the diminishing risk of a too hawkish Federal Reserve should have elicited a more salutary response. But this is not your father's stock market!
The problems seem to be that the consensus view of a short-lived and painless domestic recession is losing its credibility and that expectations for a turnaround in corporate profit growth in the last half of 2008 and early 2009 are being dashed (bears would be more dramatic -- they would say that expectations are that we are now or soon will be crashing down).
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