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Zacks: Fed Boost Won't Last Long

History suggests that the Fed's effort to boost the economy with rate cuts may not do much to lift the stock prices of financial companies over the long run, according to an analysis by Zacks Investment Research, which owns Zacks.com.

Analysts looked back to the Fed's rate cuts in January 2001, also meant to stave off a recession, to surmise what may happen this time. In those days, the tech sector was the weakest part of the stock market. While tech stocks rose sharply immediately after the rate cuts, the bounce did not last and tech stocks and both the Nasdaq and S&P 500 did not bottom out until autumn 2002. Zacks believes that a similar pattern could hold today, though financial stocks had a more muted reaction to the Fed's rate cuts. But Zacks says that the rate-induced bounce in prices for financial firms may dissipate. (c) 2008 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/

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