| What's your informed hunch as to what the Federal Reserve decides at its meeting next week? Will the central bank significantly cut rates, slightly cut them, or stand pat? If the Fed doesn't cut rates, how do you think the stock market will respond? Fed Chair Jerome Powell is walking the proverbial tightrope. He wants to appease the White House, which would like to see him cut rates by a half-point now, but at the same time, he needs to leave enough room for rate cuts later on if the economy starts to stall out. For those reasons, I think the Fed will cut rates by a quarter of a point, along with language making clear its willingness to cut again if economic conditions warrant additional stimulus. Not cutting at all would send a shock wave through the stock and bond markets, and cutting by a half-point might send the wrong signal to the market that the economy is a lot weaker than feared. Name a couple of underrated sectors right now that are poised to take off and explain why they will enjoy tailwinds. It is difficult for any sector to take off when the overall stock market is stagnant. That said, my IDEAL Stock Rating System indicates that energy, financial and consumer staple stocks are currently undervalued and likely to outperform the overall stock market over the next 6-12 months. The one big positive for the U.S. economy is the very low unemployment rate, which in turn drives consumer spending. That also increases demand for credit, which is one of the major engines of the financial sector. A strong economy also increases demand for all forms of energy. Just this week, we saw proof of that in the Q2 results released by credit card issuer Discover Financial Services (NYSE: DFS), which reported a 12.5% increase in EPS. As a result, its share price spiked 9% in a single day. Shares of electronics retailer Best Buy (NYSE: BBY) are up 15% during the past month on no news at all, just the expectation of strong performance when it releases its next set of quarterly results a month from now. Stable energy prices are good for "midstream" master limited partnerships, such as Genesis Energy (NYSE: GEL), which get paid a fee to transport and store oil and gas. GEL is up 25% so far this year, and pays an annualized distribution rate of 9.3% to its unitholders. That's better performance than the SPDR S&P 500 ETF (NYSE: SPY), which is up 22% thus far in 2019 and pays a 1.9% dividend yield. The bond market is largely driven by expectations for future economic growth. What is the bond market telling us right now? The 10-year Treasury note is currently yielding 2%, which pretty much tells you everything you need to know about what type of economic growth the bond market is expecting. That number happens to coincide with the most recent GDP forecast by the Fed, which projects a GDP growth rate of 2% in 2020 and 1.9% in 2021. From a longer term perspective, the bond market will have to reconcile the implications of the rapidly expanding federal deficit, which could send interest rates soaring in a few years if nothing is done to bring federal spending under control. The White House recently signaled its willingness to consider revising its recently submitted $4.7 trillion budget proposal for next year, but it will be difficult for such a deal to be consummated during the heat of campaign season. Moreover, if some of the promises being made by several of the high-profile Democratic presidential candidates are to be believed, the federal deficit would expand dramatically to pay for universal health care, free college tuition, and the elimination of fossil fuels. Of course, most campaign promises are never kept, but there will be political pressure to increase spending in those areas. Editor's Note: As my interview with Jim Pearce just made clear, investors face growing risks. But what if I told you there's a way to make consistent profits, in bull or bear markets? That's where my colleague Jim Fink comes in. Jim Fink, chief investment strategist of Velocity Trader, Options for Income, and Jim Fink's Inner Circle, has developed a way to quickly and predictably multiply the gains of regular stocks. Jim is now making you a promise. If he doesn't deliver 24 triple-digit winning trades over the next 12 months, he'll fork over $1,950. Each time Jim has made this bold bet, he has delivered. Jim has put together a new presentation, in which he discusses how to make 163% profits, whether the market is going up…down…or sideways. Want all the details? Click here now. | 
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