A Closer Look At Financial And Consumer Conditions

Financial market conditions continue to show general improvement. However, participants are still clearly on edge; and this fragile rebound for confidence in the system could quickly come crashing down should another crisis point develop. This is no doubt the concern of both the Federal Reserve and Treasury Department. It has been suggested that the government will delay the results of its stress test of the United States’ 19 largest banks until after earnings season to avoid an adverse market reaction. And, in their statement, the FOMC said credit “remained very tight,” financial markets were “fragile and unsettled,” and pressure was “intensifying.”

For months, investors and traders have more-or-less overlooked the general health of the US economy. This has been the case because either its global counterparts were in worse shape or demand for liquidity drew capital into the deep end of the market’s pool. However, with fear of liquidity letting up and other governments ramping up fiscal stimulus, the American economy and currency may lose its appeal. And, considering the bearing on economic trends, the future is dimming for the dollar. Last week, NFPs plunged another 663,000 – boosting joblessness to 8.5 percent. This may end up producing what the Fed calls a ‘feedback effect.’