Down Day for Stocks

The stock market went down significantly today, a day after the Fed announced that it would rollover some of its previous purchases to buy government bonds.  The market decided a day later that it wasn’t all that good of news.  Of course, the stock market investors really wants to hear something more drastic from the Fed and they aren’t getting it right now.

Until the Fed announces something significant (like forcing banks to lend excess reserves), then we will likely continue to see stagnation or worse.  It looks like the only thing that will send stocks straight up at this point is some massive money injections (which we obviously don’t want).  Unemployment remains high and interest rates remain low.  People are scared and rightly so.  The government has created massive malinvestments in the economy and it isn’t letting the problem fix itself.  As long as the government continues to spend like crazy and bail out failed businesses, the economy cannot flush out all of the bad investment.