The Odds Of A Fed Rate CUT Are Now 35% Before Year End – Mike Swanson (03/22/2019)

This has been an interesting week for the markets to say the least. I thought it would be a key week for the year, but it has turned out to be one in a different way than I thought it would be.

The Federal Reserve made a dovish surprise and completely threw in the towel when it came to anymore rate hikes for 2019.

But something interesting has happened. The 10-year Treasury bonds plunged to a new low for the past twelve months and now the 2-10 year yield curve is even closer to inversion.

Take a look at the chart.

An inverted yield curve is the most accurate predictor of an economic recession 6-12 months out that there is. It’s not inverted yet, but is heading there and getting closer despite the stock market rally Thursday and the bullish predictions I heard Thursday of a second-half economic boom on CNBC in tech to justify it.

Now here is another perhaps more interesting fact – the Fed Fund futures market now have the odds of an interest rate CUT before year end at 35%.

So people are saying to themselves buy stocks and buy bonds before the Fed cuts rates or gets even more dovish than they were this week.

However, for the Fed to lower rates would mean seeing another big stock market decline like last year first!

So they are buying ahead of an event that when it comes would be bad.

But before it comes things seem good so people bought yesterday.

Fascinating times. I can’t recommend all these popular stocks people love to buy, because I’m sticking to the real market leaders that I think will benefit from the next rate cutting cycle.

Yes, that means gold stocks.

But there are also high dividend stocks now soaring too as people look for yields that are vanishing in the bond market.

I bought one such stock in the Seven Position Portfolio yesterday.

I also talked with Jim Goddard about this week’s action in the market for his show. One thing I told him is that the market action does suggest that dope stocks can breakout in the coming weeks. You can listen to it here:

Click here: Interview with Jim Goddard of Howestreet.com

I also told Goddard that you don’t have to figure out what is happening with every single market, but instead it’s best to stick with a sector you understand with a strategy that is nailing it in this market.

Personally, I’m am not now trying to trade or time the S&P 500 as I don’t really think it’s going anywhere meaningful for a few months, but I am shorting weak stocks with a portion of my money and going long in strong sectors.

I’m acting more as a hedge fund and focusing on this in my private Power Investor Group.

And you can also use other trading strategies to make money in a market like this too.

For example, Jeff Bishop is a super-smart options trader and instead of just playing SPY or buying stock picks is killing it in options.

Jeff quietly built a valuable reputation among serious traders for his uncanny ability to consistently score double, triple… even 4x digit returns with options!

He’s now sharing his options strategy in a book you can grab here.

-Mike




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