Source : www.thestreet.com
Adam Oliensis
For those worried that the Fed is not being accommodating enough, I'd
like to point out that at least on one metric the Fed is being at
least as accommodating as it has been at any point in the last 12
years.
This chart plots the Y/Y change in the Fed Funds Rate (red) along with
the Y/Y change in the analysts' consensus for forward 52-wk earnings
per share, as published by Standard & Poor's.
The correlation between the 2 series is extremely strong.
Source: TheAgileTrader.com
When the red line is below the blue line and falling, the Fed can be
considered to be accommodating. When the blue line is below the red
line and falling the Fed can be considered to be behind the curve.
There are only 2 other periods on this chart when the Fed was as
accommodating as it has lately been: in '95-'96 at the left of the
chart when the red line was falling from 2%+ down to about -1%; in
'03-'04 when the Fed let the red line stay below 0% as the blue line
soared up to +20%.
The market responded quite strongly subsequent to both periods of
accommodation and the Fed met with, if anything, criticism for being
too easy for too long!
The Fed may be going slower than you'd like, but they're moving with
alacrity by the standards of government institutions.
And if they were going faster ... well, what kind of shape would the
dollar be in, what would oil cost, and what would the
"stagflationists" be saying?
Adam Oliensis
For those worried that the Fed is not being accommodating enough, I'd
like to point out that at least on one metric the Fed is being at
least as accommodating as it has been at any point in the last 12
years.
This chart plots the Y/Y change in the Fed Funds Rate (red) along with
the Y/Y change in the analysts' consensus for forward 52-wk earnings
per share, as published by Standard & Poor's.
The correlation between the 2 series is extremely strong.
Source: TheAgileTrader.com
When the red line is below the blue line and falling, the Fed can be
considered to be accommodating. When the blue line is below the red
line and falling the Fed can be considered to be behind the curve.
There are only 2 other periods on this chart when the Fed was as
accommodating as it has lately been: in '95-'96 at the left of the
chart when the red line was falling from 2%+ down to about -1%; in
'03-'04 when the Fed let the red line stay below 0% as the blue line
soared up to +20%.
The market responded quite strongly subsequent to both periods of
accommodation and the Fed met with, if anything, criticism for being
too easy for too long!
The Fed may be going slower than you'd like, but they're moving with
alacrity by the standards of government institutions.
And if they were going faster ... well, what kind of shape would the
dollar be in, what would oil cost, and what would the
"stagflationists" be saying?