Farrell: Market Will Like Fed's Message

I just finished a quick hit on "Street Signs" with Erin Burnett.

The Fed kept theFed Funds rate unchanged but I like the statement they issued. I read it as saying the upside risk to inflation is more on their minds than anything else. I believe that's as it should be and the market will like this message well enough.

Since the European Central Bank has telegraphed a rate increase at their next meeting this statement by the Fed effectively pre-empts any negative dollar bias the ECB's move would have had. The dollar will likely stay in a trading range until oil corrects or the Fed actually raises rates, but at least it will be in a range.

Erin mentioned the horrible reading on consumer confidence that was released yesterday. The Conference Board is a NY based business research group. They survey consumer confidence using 1985 as a base line reading of 100. Yesterday's report was as bad as it has ever been. The June reading was 50.4, down from 58.1 last month.

The recent peak was 111.9 in July, 2007. I saw a very interesting note from Francois Trahan of ISI concerning this. He said that the market has delivered "positive returns 96% of the time over the next 12 months when consumer confidence has dipped below a reading of 60." I guess the bad news is reflected in such a low reading and the surprises can then be on the upside. Those that don't study history are condemned to repeat it. I wouldn't mind repeating the positive 12 month trend noted above.

Carly Simon is 63. How could "You're So Vain" actually be 63 !!