The markets have rallied in a big way over the past few days, in large part due to comments by the Fed which suggested that they will cut rates again at their next meeting, as well as lower oil prices. Financials rose today on news that the Bush administration and some financial institutions were near a deal to temporarily freeze interest rates on certain subprime home loans, which may help stem a tide of foreclosures as many subprime mortgages are scheduled to "reset" to higher rates. Markets seemed to shake off disappointing consumer spending data which suggests that the financial turmoil may be spreading to the real economy.
The market has been incredibly volatile in the last few weeks, highlighting the fact that markets can often appear to be irrational. It sure has been fun to watch, here on the sidelines. It seems as though the markets over reacted in the last couple of days. We expect that they will lose much of their recent gains by early next week.
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