Are markets looking beyond the slowdown?
Swings in market sentiment were particularly pronounced in the early months of 2001. While it was clear that the US economy had begun to slow substantially, market participants vacillated in their views about the likely length and depth of the slowdown, the extent to which it would spread to Europe and elsewhere, and its ramifications for corporate earnings and credit quality. Inter meeting policy rate cuts by the US Federal Reserve buoyed the markets in general, while company profit warnings tended to depress the equity markets. By April, investors seemed to be confident of a brief slowdown and to be looking beyond it to a strong recovery in corporate earnings.