Good for Stocks, Better for Gold: Bernanke’s “Stuck at Zero”

Yahoo Tech Ticker – Feb 12, 2010 12:50pm EST by Peter Gorenstein

Once again, Beijing’s efforts to cool their red hot economy are causing a sell-off on Wall Street. For the second time in a month, China said it would require banks to increase reserve levels thereby curtailing lending.

The news quickly killed Thursday’s one-day rally and once again raised concerns the recent market sell-off is in its early stages. “The global economy is slowing,” says Michael Pento, chief market strategist with Delta Global Advisors, pointing to stagnant commodity prices. “That’s why I think, we’re having a double-dip recession here in the United States and a slowdown, unlike what the IMF predicts, a slowdown in global GDP.”

Though it’s a near term headwind, Pento believes that economic weakness could actually spark a rally later this year, once the market realizes Federal Reserve Chairman Ben Bernanke, contrary to recent posturing, will keep rates “stuck at zero.”

Low rates will kill off the dollar rally and “be positive, in nominal terms, for the major averages,” says a confident Pento.

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