This weekend the odds of at least one interest rate cut in the Fed Fund futures market by December were over 90%, but they were less than 50% that a cut would happen by June. After yesterday though the odds of a June cut are now at 75%!
The rate target is currently 150-175 so 28.5% represents no change on the above table.
Maybe a June cut won’t happen. Maybe the stock market will bounce hard now, but even if it does there will be a rate cut before this year is over now for sure.
All it takes is one bad day in the stock market to make another round of interest rate cuts appear over the horizon. Yesterday the Treasury bond yield curve went further negative again. If you buy a ten year bond you now get a whopping 1.38% yield. It’s a joke. Forget about the coronavirus the real sickness in the financial system is growing debt. This is why the Federal Reserve had to lower interest rates three times last year when all the stock market did was come 5% off of a 52-week high.
And this is why last week Fed Governer Lael Brainard talked about a new massive QE operation when rates go down in order to keep them down. The interest rates are artificially low and have to be kept low or else the government will default on its debts.
That is where we are now.
Stock market traders and investors don’t care. All they want is the market to go back up after yesterday’s nasty DOW 1000 point drop. The action is very similar to what happened when in the first quarter of 2018 so we’re not headed for a big 2008 style crash here.
But the action this year shows us that it is getting very tricky now in the stock market. Really the only easy place to make money now is in gold, silver, and the mining stocks. The GDX ETF beat the S&P 500 last year and it’s doing it again so far this year and just wait to see what happens when the next round of rate cuts start!
I am now watching another ETF that doesn’t have anything to do with gold, silver, or energy that I believe is lining up. This ETF barely fell yesterday so is looking like it is positioning itself to me to become a future market leader.
When bad days happen in the markets you look to see what holds up. I did a post on this ETF for Power Investor members here Sunday:
If you are not a member of my private Power Investor group NOW is the time to get in with what is happening in these markets and with gold. You must get in NOW! To do that go here:
-Mike
