The market was holding its breath yesterday and hanging on Fed Chair Jerome Powell’s every word for any hint of when we could see interest rate cuts.
| | | | | | | | | | | | The Cuts Aren’t Coming
The market was holding its breath yesterday and hanging on Fed Chair Jerome Powell’s every word for any hint of when we could see interest rate cuts.
Powell signaled we could expect just one rate cut this year instead of the three The Fed discussed back in March.
Fed chairs see the Fed funds rate peaking at 5.1% in 2024. Meaning the Fed will cut rates by 0.25%. The Fed has raised interest rates in mostly .25% increments recently and we are currently sitting at a targeted Fed fund rate of 5.25%-5.5%.
Much of the market was disappointed to say the least but Powell reminded everyone that these projections are not set in stone and are simply forecasts that do not determine a “really strong commitment to a particular rate path”.
At each Federal Open Market Committee policy meeting, all policymakers take a survey indicating where they think rates are heading in the future:
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| | | | In total, 15 officials predicted a rate cut this year. With 8 officials estimating two rate cuts and seven officials estimating just one, 4 policymakers predicted no rate cuts at all.
You’ll be happy to hear that none predicted any rate hikes for the remainder of the year!
And for 2025, the majority of the policymakers see the Fed funds rate hitting 4.1%. That means 2025 could see four additional rate cuts…
But these 7 officials who predicted only 1 rate cut and the 4 officials who predicted no rate cuts this year are the ones I really want to focus on.
Would I be shocked if rates were dropped in September’s FOMC meeting? No, but I also wouldn’t be shocked if we saw no action at all.
Because the fact remains that the Fed has dangled this “interest rate cut” carrot in front of the markets for so long and caused so many bullish moves by just dangling this carrot that the talk of an interest rate cut far outweighs the impact on the market that an actual rate cut would have had.
The S&P is up over 14% this year, and the Fed’s been doing nothing but make empty suggestions about cuts…
Let’s pretend they chop rates tomorrow… Do you see the entire market soaring 14% because of one rate cut? I certainly don’t.
And that’s the point I wanted to make today… The Fed continues to use the hope of rate cuts as a more bullish catalyst for the market than cuts themselves.
And, if you ask me, they’ll look to use that same strategy through at least November (with maybe one real cut along the way).
As traders, you’ve got to love this strategy by the Fed because it gives us bullish surges on a repeated basis in the market for a much longer period of time than a single cut.
And we’ve played them very well using Automated Options. We’re 6 for 6 on live trades and are setting up the next opportunity tomorrow.
Will you be there?
If not, join Automated Options so you can be! | | | | |
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| | | | To your trading success,
Nate
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The Cuts Aren’t Coming The market was holding its breath yesterday and hanging on Fed Chair Jerome Powell’s every word for any hint of when we could see interest rate cuts.
Powell signaled we could expect just one rate cut this year instead of the three The Fed discussed back in March.
Fed chairs see the Fed funds rate peaking at 5.1% in 2024. Meaning the Fed will cut rates by 0.25%. The Fed has raised interest rates in mostly .25% increments recently and we are currently sitting at a targeted Fed fund rate of 5.25%-5.5%.
Much of the market was disappointed to say the least but Powell reminded everyone that these projections are not set in stone and are simply forecasts that do not determine a “really strong commitment to a particular rate path”.
At each Federal Open Market Committee policy meeting, all policymakers take a survey indicating where they think rates are heading in the future: In total, 15 officials predicted a rate cut this year. With 8 officials estimating two rate cuts and seven officials estimating just one, 4 policymakers predicted no rate cuts at all.
You’ll be happy to hear that none predicted any rate hikes for the remainder of the year!
And for 2025, the majority of the policymakers see the Fed funds rate hitting 4.1%. That means 2025 could see four additional rate cuts…
But these 7 officials who predicted only 1 rate cut and the 4 officials who predicted no rate cuts this year are the ones I really want to focus on.
Would I be shocked if rates were dropped in September’s FOMC meeting? No, but I also wouldn’t be shocked if we saw no action at all.
Because the fact remains that the Fed has dangled this “interest rate cut” carrot in front of the markets for so long and caused so many bullish moves by just dangling this carrot that the talk of an interest rate cut far outweighs the impact on the market that an actual rate cut would have had.
The S&P is up over 14% this year, and the Fed’s been doing nothing but make empty suggestions about cuts…
Let’s pretend they chop rates tomorrow… Do you see the entire market soaring 14% because of one rate cut? I certainly don’t.
And that’s the point I wanted to make today… The Fed continues to use the hope of rate cuts as a more bullish catalyst for the market than cuts themselves.
And, if you ask me, they’ll look to use that same strategy through at least November (with maybe one real cut along the way).
As traders, you’ve got to love this strategy by the Fed because it gives us bullish surges on a repeated basis in the market for a much longer period of time than a single cut.
And we’ve played them very well using Automated Options. We’re 6 for 6 on live trades and are setting up the next opportunity tomorrow.
Will you be there?
If not, join Automated Options so you can be! To your trading success,
Nate
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