Markets 'working well' - Bernanke's calming effect

Posted Feb 28th 2007 12:55PM by Melly Alazraki
Filed under: Market Matters, Economic Data

Greenspan said the U.S. economy could find itself in a recession in 2008 and then the market plunged. Sure, there was a global sell-off that happened to coincide with his statement, but what is it about Greenspan and his doomsday statements. I much prefer Bernanke's financial markets 'working well' to Greenspan's 'irrational exuberance.' Of course, both phrases were said with the expectation of affecting the market a certain way exactly when, as Fed Chairmen each in their own time, did exactly what they were supposed to do.

Federal Reserve Chairman Ben Bernanke said earlier today that stock markets "seem to be working well'' following yesterday's global sell-off. More than that, Bernanke doesn't see any reason to change the Fed's economic outlook despite the lower GDP reported today.

If the markets traded with apparent uncertainty during the first hour of trading, Bernanke's words had the desired calming effect and boosted equities back up into triple digit gains before settling back down a little.

Bernanke's key points:

Reasonable probability of economy strengthening starting the middle of the year, especially if housing sector starts to stabilize
Bernanke couldn't pinpoint a single trigger for yesterday's plunge
Today's release of the revised down GDP figure is more in line with the economy overall outlook, which isn't to say his view changed on the economy (referring to the testimony he'd made on Feb. 14-15) -- that is, moderate growth going forward
Mortgage market still healthy despite the subprime mortgage issues, which he thinks haven't spread

Tags: bernanke, economy, gdp, greenspan