Einfach köstlich, die morgige Zinsentscheidung der Fed wird nunmehr zu dem Schicksalstag schlechthin für die Börsen erkoren. Wird Ben Bernanke der weiße Ritter der Börsen sein? Passende After-Fed-Szenarien sind von den Protagonisten bereits entworfen: Der Höllenschlund eines Sell-Offs, der einen 500 Punkte Absturz des Dow innerhalb weniger Minuten mit sich bringt, falls der Entscheid der Fed nicht marktkonform ausfällt, oder ein Upside-Himmels-Kick von bis zu 575 Punkten, wenn die Zinsen um einen halben Prozentpunkt gesenkt werden sollten. Auf alle Fälle ist mal wieder großes Kino angesagt. Und so titelt USAToday aktuell fast ganz im Stile einer effektheischenden Sensations-Journaille
Stocks' fate hangs on Bernanke's move
Will Ben Bernanke ride to the rescue?
The fate of the stock market, most Wall Street pundits say, now rests in the hands of Bernanke, the nation's top central banker.
When the Bernanke-led Federal Reserve meets Tuesday, it is expected to cut its target for the fed funds rate — the rate banks charge each other for overnight loans — for the first time in the Bernanke era. Investors say cuts are necessary to revive a wobbly economy dragged down by the sinking housing market and resulting defaults on mortgages taken out by folks with shaky credit.
The upshot: Historically, rate cuts have had a positive impact on stocks, more often than not pushing prices higher. The reason: Lower borrowing costs enable consumers to keep spending, which injects new life into a moribund economy and boosts corporate profitability — all keys to stock market vitality. A lower fed funds rate means lower rates on home-equity lines of credit.
"The big thing is cuts lighten the burden of interest charges and facilitate further borrowing," says Greg McBride, senior analyst at Bankrate.com. "A Fed ease isn't going to cure all the ills in the housing and mortgage market, but it's a step in the right direction."
A few big questions remain: How much will the Fed cut its target rate, currently at 5.25%? A quarter of a percentage point? A half-point? Will it be the first of a string of cuts? Or one and done?
Currently, according to fed funds futures contracts, the market has priced in a 100% chance of a quarter-point cut at the Fed's meeting Tuesday. There's also a 60% chance they cut it by half a point. The market also expects the Fed to cut another quarter-point after the October meeting. There's a 24% chance the Fed will have cut rates by a total of three-quarters of a point by the end of the October meeting and an 82% chance by December.
For investors looking to position their portfolios for the months ahead, that leads to the most important question: How will stock prices react to what the Fed actually does? Here are possible scenarios laid out by a handful of money managers and economists interviewed by USA TODAY:
•If there's a half-point cut:
This is the most bullish scenario, although not likely. A bigger-than-expected cut could go a long way toward repairing investors' broken confidence, says Zoltan Pozsar, chief economist at Moody's Economy.com. (MCO) And a lack of confidence in the financial system, especially the seized-up credit markets, has been a major reason why stocks have faltered since peaking in July.
A bigger cut might also deliver a much-needed psychological boost. "It would send a signal that the Fed wants to stabilize financial markets as quickly as possible, says Edward Yardeni, chief investment strategist at Yardeni Research.
It would also reduce the odds of the economy falling into recession, adds Rod Smyth, chief investment strategist at Wachovia Securities. (WB) "There is a sense that the Fed can come along and fix this and we can avoid recession," says Smyth, adding that stock prices currently are not pricing in a recession.
How much would a half-point cut help stocks? It could spark a rally, with upside gains estimated at 275 points to 575 points for the Dow Jones industrials (not necessarily all in one day), if the promise of more cuts was hinted at by the Fed in its statement following the meeting.
"The knee-jerk reaction would be, 'Whoopee, here comes the Fed just like we wanted,' " Smyth says. "It would not surprise me if the Dow made it back to 14,000 (it's currently 4% below) in a few weeks."
Which sectors would benefit most?
Typically, six months after a Fed rate cut, consumer discretionary and financial stocks are the top two best-performing sectors, according to Citi Investment Research. And Michael Farr of Farr Miller & Washington thinks the same thing could happen again after a half-point cut. Speculators would quickly see a rate cut that large as a signal of a trend of lower rates and scurry into the areas hurt most by the credit crunch. Farr says that would include the consumer discretionary sector, which contains home builders' stocks and financial stocks, such as mortgage lenders and investment banks. "I could see speculative dollars fuel these areas," he says.
•If there's a quarter-point cut:
While this is the most likely scenario according to most Fed watchers, it's also the hardest one to predict winners because it may already be reflected in stock prices, Farr says. Less than half a point, therefore, is likely to be viewed by investors as a disappointment.
The direction of stock prices would then depend on how market-friendly the Fed's statement is. Stocks might get a little bounce if the Fed says, "We will give you more cuts if financial market turmoil persists and credit markets don't normalize," says Pozsar of Economy.com. Stocks are likely to fall if the Fed basically says, "That's all you are going to get," Pozsar adds.
There's a good chance the Dow could give back 100 to 300 points if the Fed cuts only a quarter-point. "The risk is the Fed reacts too conservatively," Yardeni says. "The problems in credit markets are big enough that they require a bold move by the Fed."
Some investors may choose to play it safe by shifting money overseas in case the U.S. economy slows further, says Sam Stovall of Standard & Poor's. (MHP) These investors may opt for stocks with the biggest exposure to foreign economies, including industrial and tech companies, he says.
•If there is no cut:
This is the most bearish potential outcome of all the scenarios, as investors will not only be greatly disappointed but might conclude the Fed is not being nearly aggressive enough to avoid a more serious economic and financial event.
"It's the most forecasted rate cut in history. If they don't cut, expect a 500-point drop in minutes," warns Gary Kaltbaum, president of Kaltbaum & Associates. Kaltbaum thinks the Fed is way behind where it should be in the rate-cutting cycle, noting that the fed funds rate is more than three-quarters of a percentage point above the yield on the 10-year Treasury note. He thinks the Fed should drop rates "a full point."
The Dow could test the lows hit in August.
And if the sell-off in mid-July — when fears of the credit crunch first surfaced — is a guide, investors shouldn't expect there to be many havens if cuts don't happen. All 10 of the market sectors have lost ground since the July 19 market peak, Stovall says.
http://www.usatoday.com/money/economy/2007-09-16-markets-fed_N.htm
P.S.: Die Erde wird sich auch nach dem Zinsentscheid der Fed weiterdrehen.
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