Citing deteriorating market conditions and tighter credit for “some businesses and households”, today the Federal Reserve cut the Federal Funds interest rate by 0.75% in an emergency move a week before members of the Fed would normally take such a step. It is the largest single reduction in the rate since 1990 and the first ‘emergency’ rate reduction since a week after the 9/11 attacks. In and of itself this action by the Fed is newsworthy.
Yesterday, however, while our markets were closed due to the holiday, equity markets around the world sharply accelerated their declines on the heels of their poor performance year-to-date and last week, in particular. For many markets such as Tokyo, Hong Kong and our own Russell 2000 (An index of US Small Cap stocks), this year’s declines have extended losses from their peaks last year to -20%, to many the definition of a Bear market.

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