The Fed Finally Caved, Now What?Wall Street got its rate cut, but history says trouble’s ahead. What’s the play in this volatile market?
Wall Street has been like a kid screaming for a Happy Meal after driving by McDonald’s. Well, today that kid got their meal. The Fed has finally kicked off its cutting cycle—delivering the first rate cut since the pandemic. A 50 basis point cut, to be exact. But here’s where it gets interesting. Historically, when the Fed starts with a cut this aggressive, it’s a warning bell. Twice before, we’ve seen the Fed open up a cycle with a 50 bps cut. Once in September 2007, just before the financial crisis, and again before that. In both cases, the markets tanked within 12 months—averaging a 15% loss in the S&P 500. And both times, we were already in a recession. This time, the Fed claims we’re safe. They say they can avoid a recession. If that’s true, it would be the first time in history this has happened after such a big cut. But here’s the kicker: I’m betting they can’t pull it off. Why? During Powell’s press conference, he dropped his new buzzword: “recalibration.” Sound familiar? It’s just another way of saying “pivot” without admitting defeat. The last time he tried this trick was when he said inflation would be “transitory.” We all know how that turned out. But let’s think about it: If the U.S. economy is “basically fine” as Powell claims, why such a drastic cut? The bond markets certainly aren’t buying it. The long end of the bond market (10 and 30-year bonds) is flashing warning signs of inflation ahead.
While the Fed can toy with the short-term (2-year Treasury), the long end is where the free market rules. And right now? It’s saying things are about to get dicey. If the dollar continues its slide and dips below $100, the playbook is simple: Bonds and emerging markets. That’s where the opportunity lies if things go south. But make no mistake—whether the market’s heading up or down, we’ll be ready. Our range of premium research services is designed to help you navigate this exact chaos. Whether you’re looking to profit from short-term swings or make long-term strategic plays, we’ve got you covered with clear analysis and timely ideas. The Fed might be confused, but we’re not. Tomorrow's Jobless Claims data is just the beginning of what’s about to become an economic rollercoaster. Are you ready for the ride? Smart trading, You’re currently a free subscriber. Upgrade for the full experience and receive exclusive special reports like "How to Get Rich in The Stock Market" and "Congress' Secret Stock Playbook: The Top 5 Power Picks Revealed”.
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Rabu, 18 September 2024
The Fed Finally Caved, Now What?
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