Sunday, September 23, 2007

Fed Rate Cut Signal - Time To Be Invested In The Stock Market

If history repeats itself, the Fed interest rates cuts on September 18, 2007 signal the beginning of market run up and significantly higher values one year from now. According to the Wisconsin Rapids Tribune article Rate cut could skew investing path toward stocks, gold:

"A recent study by the CFA Institute found that tweaking your investments according to the Fed's monetary policy can be highly beneficial. The stock market averaged a 12 percent annual return from 1973 through 2005. When the Fed has pursued an expansive monetary policy and lowered short-term interest rates, the stock market gained an average 17.41 percent a year. When the Fed was raising rates, the stock market gained an average of only 5.34 percent a year."

Sensei over at Stock Rake also points out a signal first identified Norman Fosback in the 1973 book Stock Market Logic called "two tumbles and a jump." According to The Most Telegraphed Big Money Signal Ever?:

"Twenty calendar days after the signal, the S&P 500 is usually up an average of 4%. According to Fosback, the average S&P gain after three months is 11%; after six months, 15.9%, and after one year, 29.7%. Fosback says the two-tumbles signal is most effective in the six-month and yearly intervals. In 18 of 19 times, returns have been positive."

Over the next two weeks, I plan to be making investments in:
  1. An updated stock pick list from a modified Unemotional Investor Growth system.

  2. Domestic and Foreign diversified stock ETFs. VWO, EFA and SPY are some that I am considering.

  3. Select country and sector ETFs. I have already purchased the Brazil ETF, EWZ, and the China ETF, FXI.

I will publish my specific equity purchases as they are made.

For more on New Beginnings, check back every Sunday for a new segment.

Photo Credit:, Kees Huyser

This is not financial advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

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