Halloween, with its ghosts, ghouls, and demons, is always somewhat scary. For the financial markets, though, as a Los Angeles money manager, Arnold Silver, quipped, “Halloween could turn out to be Helloween.” Why? Because October 31 is the day we get the initial numbers on third-quarter gross domestic product and the Federal Reserve Open Market Committee meets to decide the course of interest rates.

With the housing and credit markets in turmoil, the economy slowing, and the skyrocketing price of oil, who knows what the third-quarter GDP number will look like or what the Federal Reserve will do?

“The day could be hairy and scary, and any unpleasant surprises could produce a huge loss in the session,” Mr. Silver said. Mr. Silver is taking his worries to heart. In the past two weeks, the money manager, whose firm, A. Silver Associates, manages $142 million of discretionary accounts, has boosted cash reserves to 28% from about 12%. This also includes sales of his favorite stock, Google, though he’s convinced it’s eventually headed to $1,000 a share.

An economist at Raymond James Financial, Scott Brown, doesn’t think Halloween will be a horror show, but he says, “It’s still uncertain whether it will be a trick or treat for the financial markets.”

He may be right about no horror show, but his outlook for that day’s economic disclosures is hardly without fright. His expectation is the third quarter’s GDP growth will show a decidedly slowing trend from the second quarter’s 3.8% growth rate. Mr. Brown pegs third-quarter growth at 2% to 2.5%, which is what I also get from a number of other economists, though some growth forecasts are up in the 2.5% to 3% range and some 3%-plus.

He notes that housing remains a drag, but he believes the weakness there is not sufficient to throw the economy into a recession. He also cites such offsetting economic pluses as an improvement in the credit markets, very strong global growth, and a strengthening export business due to the collapsing dollar.

Still, Mr. Brown is not entirely ruling out a recession, which he rates as a 25% possibility due to the ballooning price of oil, which recently topped a record $88 a barrel, and a general level of uncertainty that could prompt corporate America to cut back on its expansion.

Views on the Fed’s Halloween action are all over the lot, though the overriding expectation is another reduction in the feds fund rate is likely because of the ongoing difficulties in the credit and housing markets. Most economists I talk to expect a decrease of 25 basis points, following last month’s cut of 50 basis points to 4.75%.

Some pros say the market will be disappointed if the Fed does nothing in the face of ongoing credit and housing worries and lingering fears of a recession. Whether they’re right is anybody’s guess, but Mr. Brown, for one, thinks nothing is precisely what will happen. Because of improved credit conditions and what he says are mixed inflation signals (a gushing oil price but growing discounts at retail), the economist looks for the Fed to hold rates steady.

One of the brightest economic minds around, Allan Sinai, the chief global economist of Decision Economics, also sees no rate cut, citing his expectations of stronger than expected third-quarter economy GDP growth of 3% to 3.75%. He ascribes this to strong consumption and exports, as well as lower gas prices in the period. Accordingly, he feels it’s more than likely the Fed will not cut rates again at its next meeting.

After sounding a cheerful economic note, though, Mr. Sinai quickly conjured up a grim scenario. His projected solid third-quarter showing, he notes, is nothing more than a flash in the pan because after that he looks for the economic roof to cave in. For example, he expects the current quarter’s GDP growth to plunge to between 1.5% and 2% with the weakening housing market, leading to a conspicuous reduction in consumer spending, the chief culprit.

What’s more, he tells me, “we’re in the calm before the storm,” further observing that it should be quite a while before we see another quarter of 3% GDP growth, maybe a year or more. Contending “we have a housing bust that has another leg down,” Mr. Sinai figures 2008 will be a rotten year for a lot of homeowners and businesses. He thinks there’s a 40% chance of a recession in 2008 or perhaps a growth recession, a period in which the economy will grow a lot less than usual, say on the order of 1% to 1.5% for the entire year. By the end of next year, he calculates, the unemployment rate here will rise to 5.25% to 5.5% from September’s 4.7%.

What does it mean for investors? “We’re sniffing around now for an equity bear market,” he says. He estimates earnings growth next year will be about half or maybe a third of what it will be this year, “and we all know,” he says, “stock prices mimic earnings growth.”

dandordan@aol.com