URGENT: Interest Rates & Your Stocks
Trump’s tough trade talks have scared the Fed silly.
Last week, the president of the St. Louis Federal Reserve, James Bullard, said the economic outlook had “darkened” because of the trade wars.
“A downward policy rate adjustment may be warranted soon,” Bullard suggested, referring to a potential rate cut.
Bullard says, “Both inflation and inflation expectations remain below target, and signals from the Treasury yield curve seem to suggest that the current policy rate setting is inappropriately high.”
This was the first time a Fed official has publicly advised the need for a rate cut since the Federal Reserve said it would be “patient” with any policy changes.
Bullard is even citing the recent inverted yield curve — interest rates on 10-year bonds have fallen below 3-month yields — as a valid reason to bolster the case for rate cuts.
Bullard tells CNBC, “A downward adjustment of the policy rate may help re-center inflation and inflation expectations at the 2% target,’ as well as provide ‘insurance’ against a sharper-than-expected economic slowdown,”— comparable to rate cuts the Fed made in the mid-1990s to nudge along that expansion.
So, what’s the lesson for you in this?
“Don’t Fight The Fed”
The very next day, Fed Chairman Jerome Powell followed up by saying the Fed will “act as appropriate to sustain the expansion.”
And look what happened to the stock market as soon as Powell opened his mouth.
Powell’s comments sent the Dow Jones up by a whopping 512 points!
If you’re old enough to remember Wall Street Week with Louis Rukeyser, keep in mind the wise words of trader extraordinaire Marty Zweig: “Don’t fight the Fed.”
The Federal Reserve is on your side. It’s willing to do anything — including rate cuts, ZIRP (zero interest rate policy) and a return of QE (quantitative easing) to keep the economy and stock market alive.
Any economic slowdown must be stopped at all cost and that means the stock market is headed higher.
The next FOMC meeting is on June 18–19 and if the Fed follows through on these rate cuts hints, the stock market will push toward a profitable, powerful summer rally.
Bottom line: The new direction the Fed is taking bodes well for stocks. Last month was rough, but we hope you didn’t panic. Continue to hold your positions. Your big payday is coming.
Here’s to growing your wealth,
Chief Income Expert, Mike Burnick’s Wealth Watch