The Trend Continues

The S&P 500 dropped more than 3% today. With the information on the loss of jobs, for the first time in four years, released last week and the release today of the dramatic drop in the service sector, to a low not seen in seven years, indications are clear that we are nearing recession conditions. To be a recession the economy must undergo two quarters of decline. Adding to this contention is the fact that the Federal Reserve saw fit to drop the discount rate a total of 1.25% in a little over a week at the tail end of January while the President and Congress were working on pushing through a "stimulus package" in hopes of staving off a recession. It seems at this point supply outweighs demand creating deep downward moves in stock prices. On the other hand liquid assets such as money market funds, municipal bonds, U.S. Gov't fixed investments and high quality corporate bonds are doing OK. More about all of this is contained in my new Newsletter for February. Ed