I don't get this. When US economic prospects looked grim a couple of months, the stock markets seemed not to notice. Now even the occasional good news, including the Fed's determined effort to stave off recession, gets shrugged off by the markets.
I am among those who believed- and still believe- that the US economy could ride out the financial crisis without a serious slump. The University of California's quarterly Anderson forecast, released this week, is upbeat compared to some of the other stuff we have seen recently. The forecast expects US GDP growth of 1.5% this year, rising to 3% next year. Growth in 2007 was 2.2%.
The other good news comes from the Fed. The Fed still believes that the US will avoid a deep and prolonged recession such as that experienced by Japan in the nineties. Why? Because US policy makers will do what it takes to avoid recession.