The stock market finished strongly today. Some of it was attributed to positive news about the municipal bond insurers. However, I believe much of it was due to the belief that the Fed will continue cutting rates as necessary to cushion the slowdown or a potential recession.

Prior to the recent FOMC statement and the inter-meeting rate cut, the Fed was sending out mixed signals regarding rate cuts. It tried to establish its credentials as an inflation hawk; however, it also left uncertainty about its ability to deal with a recession. This reduced the effectiveness of the initial rate cuts. Many believe that the Fed would be caught behind the curve in dealing with a potential recession.

The combined decrease in the Federal Funds Rate of 1.25% in the last two weeks along with the accompanying FOMC statement has established the Bernanke Fed's credentials for dealing with a potential recession. It has replaced the current market confusion with confidence in the Fed.

It appears that the Ben Bernanke is now returning to his predecessor Alan Greenspan's formula of lowering rates aggressively to deal with a crisis. This will not solve our economic problems which I believe can only be resolved over time. Volatility will definitely continue to be part of the market environment.

However, the Fed easing will definitely help to cushion the slowdown in the economy. If this downturn is milder than expected, this may require the Fed to raise rates sooner than expected. At the moment, the Fed has decided to deal with economic weakness first.

Doug Roberts is the Founder and Chief Investment Strategist for FollowtheFed.com, an independent research firm focusing on investment strategies using the Federal Reserve's impact on the stock prices. He previously held executive positions at Morgan Stanley Group and Sanford C. Bernstein &