Currently, the Dow Jones Industrial Index is up 6.4% from its August 16th intra-day low. The Nasdaq is up 7.25%. More to the point, credit markets are showing signs of improving. The four large banks in a show of support for the Fed’s reduction of the lending rate last week each borrowed $500 million at the Fed discount window. Though they paid the money back a short while later, it was an important symbolic show of support. It also indicates that banks have better options than borrowing at 5.75% from the discount window. But there is still not enough data to show whether non-bank mortgage lenders are gaining access to the recently risk-frozen credit markets.

Today’s news from the Fed provides good reason for why I don’t write the Brief in advance. We collect data all week and I assemble thoughts along the way, but economic winds can occasionally shift so fast that yesterday’s news literally becomes antiquated. A large portion of today’s topic would have been devoted to speculation of the Fed’s next action. Well, this morning they answered the question without ambiguity.

Before getting involved with the numbers, the whys, and the wherefores of the latest global market volatility, let me reassure you, our clients, that your portfolios are conservatively allocated and diversified with higher than usual levels of cash. We do not try to time the markets, but during times of high volatility and uncertainty we err of the side of caution, particularly in the more risk-averse models. This global sell-off is all about the question of whether the growth outside of the US sustains itself in the face of a US slowdown or recession. Because it is unprecedented, investors are re-assessing their earlier rosy assumptions.

The economy’s growth is slowing across the board; jobs, consumer spending, retail sales, inflation, and manufacturing. Today’s jobs report shows that employers added 92,000 workers to payrolls in July, which was fewer than expected and fewer than June’s 126,000 gain. The slowdown reflects the first decline since January 2006. The jobless rate rose to 4.6% also for the first time since January 2006. Workers' average hourly earnings rose 6 cents, or 0.3%, in line with forecasts, after a 0.4 % increase in each of the previous two months.