Hi,
On the question of how the Fed tells that the economy is slowing down, I did not mean that it thinks the economy is slowing down at the moment. The Fed must wait until it expects protracted negative changes in the economy, including employment. This is the current problem: the Fed sees a healthy economy in current and past economic reports while the stock market is discounting a slowing economy or a recession. The Fed does not use the stock market action as a primary indicator. So the Fed must go with the trends that it detects in past economic data and reports which have been very positive.
Nevertheless, interest rate changes that the Fed makes will have a definite effect on the economy and the stock market, albeit with a time delay, given economic inertia. The Zweig model used statistics on cause and effect to produce a signal on stocks from Fed policy.
Regarding how the Zweig model pushed me into the G Fund, the federal reserve interest rate hikes and increases in the prime rate combined with my negative trend indicator to push me out of stocks.
Since 10-year Treasury bond interest rates are near all time lows, I felt that bonds overall would decrease in value in the future (i.e., interest rates would go up significantly in the future), so that "cash" (with interest at the 10-year bond rate) in the form of the G-Fund seems preferable to "bonds" (F-fund intermediate term bond index) from my risk-averse and long term perspective.
Hope that this helps.
Tex
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Posted by: mrweyl@hotmail.com
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