The Investment Implications of a Falling Budget Deficit

Last Wednesday, the Treasury Department announced a record monthly budget surplus for April of $308.2 billion.  The report elicited no noticeable market reaction, as investors continued to fret about high inflation today and slowing growth in the months ahead.  However, a Federal Reserve recognition of the economic implications of a fast-falling budget deficit could hold the key to a recovery in recently battered stock and bond markets.