Lo and behold, after a very down day yesterday, the markets were up today. That’s in spite of continued unrest in Europe and a lackluster announcement from the Federal Reserve.
On the eve of the G20 summit in Cannes, European leaders told Greek Prime Minister George Papandreou it’s time to decide if his country is going to stay in the eurozone.
And in the U.S, the Federal Reserve wrapped up its two-day meeting with an announcement of… not much. Chairman Ben Bernanke said, “While we still expect that economic activity and economic conditions will improve over time, the pace will be frustratingly slow.”
The Fed lowered its forecasts for growth in the U.S and said unemployment will remain elevated. But the markets barely flinched. It could be the slightly better-than-expected employment report from ADP this morning or just some people feeling in the mood to buy.
We speak with Jonathan Berland, managing director of Gresham Investment Management in New York. He says trying to ride out the day-to-day market turbulence is a bit like walking between subway cars: thrilling at times, but you know it’s not going to end well.
Berland says the Fed is adhering to its dual mandate to contain inflation and promote high employment. So, by pointing out the expectation that unemployment will remain high into next year at over 8.5 percent, Bernanke eventually lays the groundwork for Fed action. It just didn’t come today.
On Greece, Berland says the problem is really one of precedent. How do you tell the average Greek citizen that you’re going to give them the decision and then take that away? Other European leaders can jump up and down, but backing off from the referendum is not politically viable. And if the Greek people get a vote, the next logical question is why not the Italians, Portuguese, Irish or Spanish?
Berland says investors are going to be even more wary of those governments’ bonds when the diplomatic dust settles.
Also on the show today, news that there will be no more “Running Of The Brides” has the Marketplace Daily Pulse running on borrowed air. The 102-year-old Filene’s Basement, known for its annual wedding dress sale, is going out of business. The pioneer of discount retail famously trained its customers to come back often as unsold clothes got marked down automatically.
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