Equities fell sharply Wednesday after Federal Reserve Chairman Ben Bernanke confirmed investors’ fears that the economy has weakened. Interest rates dropped in the Treasury market as investors sought safer places for their money. Bernanke told a congressional committee that the economy is “unusually uncertain.” He said the economy is fragile, but he did not forecast that it would fall back into recession. Some investors may have been hoping for a more upbeat reading from the Fed chairman. The Fed is still expecting the economy to expand this year, but the central bank has lowered its forecast for growth. “Bernanke said he wants to collect more data before doing anything, and that’s just fine. But traders are impatient – SELL !!!

Basically Bernanke is just confirming what we already know – the economy stinks. Some are starting to talk quantative easing 2.0. My guess is this will not happen soon. Bernanke will want to save this amunition in case things really get bad. So for now it is steady as we go. I still believe the economy can go no where for quite some time, while companies make their profits overseas. There will be a bit of talk but in the end, no real change in Fed policy for quite some time – either from the hawkish or dovish side.

Market view: