The previous blog stated that the Fed funds rate was a good indicator for the US stock market. The below table shows the date that Fed changed the rate and the new rate. Note that the rate was well above the 3% target.
If you remember that the stock market reached a high on October 10, 2007. If money had been moved from stocks to bonds the stock market crash would have been avoided.
Date / Fed Funds Rate
September 18, 2007 / 4.75%
October 31, 2007 / 4.50%
December 11, 2007 / 4.25%
January 22, 2008 / 3.50%
January 30, 2008 / 3.00%
March 18, 2008 / 2.25%
April 30, 2008 / 2.00%
October 8, 2008 / 1.50%
Bottom Line: The stock market and Fed funds rate do not move perfectly together. Acting on the change of the Fed funds rate is very important as it is a very powerful signal.
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