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It Wasn't Just an Overreaction

Stock markets got hammered today, but it was nowhere near as bad as some (including me) had feared it might (might, mind you) be. Still, things are by no means peachy. I leave you with the wise words from Across the Curve:

The next two weeks have the potential to be watershed events for the markets. There is a veritable tsunami of data and events which will shape views and mold opinions.

Three events dominate the landscape. The FOMC meets this coning week and the market has priced in a 50 basis point ease. I am confident that they will do that and I am also strong in the belief that the statement at the conclusion of the meeting will encourage the belief that another rate cut is not far behind. The Committee will acknowledge the debilitated condition of the domestic economy and the similarly dire state of the global economy.

During this period the Treasury will announce the refunding package for November. They should return the 3 year note to the flock and given their absolutely gargantuan appetite they will give the market some guideposts regarding the methods they will employ to raise those funds.

Finally, the results of the election could signal the end of an era of laissez faire capitalism and usher in an era of unaccustomed regulation and government control. It certainly seems as though Senator Obama is on track to be the next President. If the Democrats can sweep the Senate they will have a clear field to change the nature of the debate as Ronald Reagan did in 1980. We will know on the morning after.

There is also a plethora of economic data on the immediate horizon. Among the reports which print next week are Consumer Confidence and Durable Goods . We will get our first glimpse of Q3 GDP and the quarterly employment cost index. The Chicago Purchasing Managers Index is on the docket as well as Personal Income and Spending data.

In the following week there is the labor data for October as well as the ISM.

When all of that data has been digested and absorbed, I think participants in the major markets will have a better idea on the near term course of the economy and interest rates.

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