When the FED cuts rates, the market adjusts within seconds. Why? Because the market knows that the cut will trickle through the market as businesses base thier spending and borrowing decisions on interest rates.
Given this, at first glance, you'd look right. Surely, the market would have anticipated any trickling-through of a weak housing market's impact on the economy and because it's not done this, it implies that there will be no impact.
Problem with this statement is that the reason people react to the FED within seconds is because it's a pre-defined and well understood cause/effect relationship. With housing, a weak housing market and a weak economy are not tautologies. Morevoer, it the result of an outlier event (a bubble, if you will). What does this then imply? That the market is going to have to WAIT AND SEE housing's effect on the economy prior to adjusting to account for it. And this Christmas, consumer spending is going to act as the first vivid image in a series. Depending on how that pans -out, companies will adjust hiring in the consumer disrectionary sectors. And the daisy chain begins.
