An article out today in the Wall Street Journal indicates that short term interest rates could remain near zero as far out as 2012. This consenus by most economists is due to the Feds assessment of the current state of the economy and how the European weakness could affect our economy here at home. As counter intuitive as it may seem this should be very bullish for the markets. Yes bullish! As long as the Federal Reserve and their international counterparts continue with accommodative interest rate policies, monies should not only continue to be deployed into the markets but at a higher velocity. Most mutual funds, institutional investors, hedge funds and individuals for that matter cannot afford to sit in sub 1% money. They have target returns that must be met or they risk the attrition that would occur with investors seeking to achieve their investments objectives. Time will tell how this plays out and when the Fed will begin to change its stance and until then let’s see how the upcoming 2nd quarter earnings look.
Good luck to all.