FED RATES VS BTC AND SPX📉 Important to note: Historically, the start of monetary policy easing has often been accompanied by market corrections. This time is likely to be no different. Investors should remain highly cautious.
FEDFUNDS trade ideas
SPX direction after first and last FED rate cutsThis chart compares FED rate cuts to SPX chart.
The last 3 times after the first rate cuts there was a slight upward rally of the SP500 of about 5-10%, before going on a bearish retrace of about -40%, -50% & -20%, and then bottoming out only AFTER the final rate cut.
Based on this, if history repeats, there might be a year end upward movement in the stock market, perhaps followed by a retrace through 2025 until the final rate cut. And then massively up from there again.
The last 3 times rate cuts did not mean sp500 starts going up immediately. There was a retrace instead. SP500 went up only AFTER the final rate cut.
Inflation, 2yr-bond yield, fund rate, unemployment, recessions The chart illustrates how five key economic indicators—Inflation, 2-Year Bond Yield, Federal Funds Rate, Unemployment Rate, and Recessions—compare across different time periods or economic conditions.
1. Inflation: This line or bar typically shows the rate at which prices for goods and services rise, leading to a decrease in purchasing power. Inflation is crucial for understanding cost-of-living adjustments and purchasing power. The chart might indicate periods of high or low inflation and how it correlates with other indicators.
2. 2-Year Bond Yield: This line represents the interest rate on 2-year government bonds, which reflects investor expectations for short-term economic conditions and interest rates. A higher yield often suggests expectations of rising interest rates or inflation, while a lower yield might indicate expectations of economic stagnation or lower rates.
3. Federal Funds Rate: This rate, set by the Federal Reserve, influences overall economic activity by affecting borrowing costs. Changes in the Federal Funds Rate can signal the Fed’s stance on monetary policy, with increases often aiming to combat inflation and decreases aiming to stimulate growth.
4. Unemployment Rate: This line measures the percentage of the labor force that is jobless and actively seeking employment. It provides insights into labor market conditions and economic health. High unemployment typically indicates economic distress, while low unemployment suggests a robust job market.
5. Recessions: Recessions are usually marked as shaded regions or periods on the chart. They indicate times when economic activity is declining, often accompanied by rising unemployment and decreasing inflation. The chart might show how other indicators like inflation and bond yields behave during recessions.
Comparative Insights:
Correlation: By comparing these indicators, the chart helps identify patterns, such as how rising inflation might correlate with higher bond yields and Federal Funds Rates.
Economic Cycles: It shows how these indicators respond to economic cycles, including periods of expansion and recession. For example, during recessions, inflation might decrease, bond yields might fall, and unemployment might rise.
Policy Impacts: The chart may also highlight the impact of monetary policy changes (reflected in the Federal Funds Rate) on inflation and unemployment.
FED Funds Rate 9-10%FED Funds Rate In the long-term, the United States Fed Funds Rate is projected to trend around 9-10%
Alertes de la courbe des rendements : correction de marché soon?Observations récentes sur le marché obligataire :
Les dernières évolutions sur le marché obligataire ont soulevé des questions parmi les investisseurs. L'inversion de la courbe des rendements, souvent considérée comme un indicateur de récession, est de plus en plus observée. Cette situation, associée à une hausse du taux de chômage et à une volatilité accrue du marché, soulève des interrogations quant à la possibilité d'une correction significative du marché.
Inversion de la courbe des rendements :
Actuellement, la courbe des rendements est inversée, avec des rendements à court terme (comme les bons du Trésor à 1&3 ans) qui dépassent les rendements à long terme (comme les bons du Trésor à 10 ans). Cette inversion indique une anticipation de croissance économique affaiblie, un phénomène qui a souvent précédé des récessions dans le passé.
Une courbe des rendements inversée a historiquement annoncé des récessions avec un délai de 6 à 18 mois, période qui a souvent été marquée par d'importantes corrections sur le marché boursier.
Taux de chômage en relation avec la courbe des rendements :
Le taux de chômage est un indicateur qui réagit avec retard. Son augmentation, en conjonction avec une courbe des rendements inversée, pourrait indiquer le début d'une récession. Les données récentes montrent une augmentation du chômage, qui, associée à l'inversion de la courbe des rendements, suggère que le ralentissement économique pourrait être proche.
Historiquement, une inversion de la courbe des rendements associée à une hausse du chômage a souvent conduit à une baisse de la consommation des ménages et des bénéfices des entreprises, impactant négativement les marchés d'actions.
Indice VIX (Indice de Volatilité) :
L'indice VIX, souvent considéré comme un baromètre de l'anxiété des investisseurs, reste à des niveaux élevés. Une hausse de cet indice, en même temps que l'inversion de la courbe des rendements et la hausse du chômage, suggère que les acteurs du marché pourraient s'attendre à une augmentation de la volatilité et à des risques baissiers.
Stratégie de trading :
Dans ce contexte, il pourrait être judicieux de réévaluer l'exposition aux actifs à haut risque. Orienter une partie du portefeuille vers des actifs jugés plus sûrs, comme les obligations ou l'or, pourrait contribuer à réduire les pertes potentielles.
Conclusion :
L'association d'une courbe des rendements inversée, d'une augmentation du taux de chômage, et d'un indice VIX élevé suscite des interrogations pour les marchés. Bien qu'aucun indicateur ne soit parfait, leur alignement mérite une attention particulière. Il est conseillé de se préparer à une éventuelle volatilité et d'envisager des stratégies défensives pour sécuriser votre portefeuille.
Votre avis sur la situation actuelle du marché serait apprécié. Surveillez-vous d'autres indicateurs ? Partagez vos perspectives et stratégies pour aborder cet environnement incertain.
Fed Funds, return to the mean? You can see what a sharp increase in the Funds rate results in, sharp cuts later on.
Will we spiral into the death zone as the dollar dies and even go negative rates? Or can they hold above 0%, we will see.
The rise of the Fund RateThe Fed rate has a potential rise to 0.41. This would be the temp target for now in my opinion and further rise above this 0.41 signifies higher in the future.
FED hawkish with encouraging inflation data. ...are we at a pantomime of a creaking economic system?
bond futures are currently pricing in a cut of just over 25 basis points in fed funds between now and the end of the year.
While the Fed bides time on a possible interest rate cut, inflation data is encouraging. Core goods (excluding food and energy), the category that drove the inflation spike in 2021 and 2022, registered its biggest deflation since 20 years. Next cut in September? Let me know your opinion with a comment. Thank you
FRED Federal Reserve Funds Rate: 5.33% | Prime Moverthe higher it goes the more selective issues instruments go up
as cost of money is expensive unless a project or asset class has
the five forces of porter in its favor more so SCARCITY & Unique Selling proposition to offer
for the rest expect volatility foreclosure or takeover
Fed Balance Sheet Up, Fed Funds Down, Powell to be Replacedcorrelations drawn using ancient chinese calendar methods
takeaway predictions:
federal reserve balance sheet to increase, fed funds rate to decrease, and fed chair powell to be replaced, all starting before the end of feb 2025
supporting data and patterns:
every fed reserve chair has started AND ended their term in either an ally year, a secret friend year (powell), or within 2 weeks of a ally year (yellen)
federal reserve balance sheet has gone up during all ally years since the record began in 2003 (orange line)
the fed funds rate (gray line) is always highly volatile during a chairman's oppositional year
federal reserve balance sheet remains neutral to down in oppositional years
there is not a direct correlation between a falling funds rate and the calendar method, but there is a strong correlation between an increasing balance sheet and a lowering of the fed funds rate. though the correlation between the falling funds rate and the calendar method is secondary, it still may be useful
debt * fed fund rateFor all those that think the end is near and we will enter an age of calamity...
Then this is your chart!
#Debt
Interest Rate Cuts 3 Times This Year May Not Happen - Here's WhyMany interpreted from the latest FOMC meeting that the Fed is going to have three rate cuts this year, but Jerome Powell did not say that.
Let me quote directly from his transcript:
“If the economy evolves as projected, the median participant projects that the appropriate level of the federal funds rate will be 4.6 percent at the end of this year”
And he added:
“These projections are not a committee decision or plan”
In today’s tutorial we will discover why so many of us got it wrong in what he is trying to tell us.
And who are these participants?
10-Year Yield Futures
Ticker: 10Y
Minimum fluctuation:
0.001 Index points (1/10th basis point per annum) = $1.00
Disclaimer:
• What presented here is not a recommendation, please consult your licensed broker.
• Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises.
CME Real-time Market Data help identify trading set-ups in real-time and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
FEDFUND vs SPX vs BitcoinHello,
Looks like Federal fund rates are going to be in uptrend (Double Bottom + Bullish Divergence in RSI), in the past from 1958 to somewhere around till 1980 SPX was in sideways move or economic decline.
Can we see something similar kind of movement in SPX?
IMO yes.
So, will Bitcoin follow SPX?
IMO Bitcoin also moves in sideways, or Bitcoin is risk on asset so may make lower lows.
2 year yield always one step foward than fed ratesThe 2-year rate leads the Fed. Right now, it would be anticipating the famous pivot
Correlation between the Fed rate and the 2-year yieldThe 2-year rate consistently anticipates the Fed rate. By examining the correlation coefficient, one can even estimate the breakdown of that correlation, which occurs with the introduction of a new macro narrative that displaces the previous one.
Ring Ring, The Credit Event is Calling. Happy October, Since November 2021 when I first spoke of issues with the Fed beginning to taper the markets we have since had a wild world of volatility. That world is about to get alot worse. Good luck, Your Welcome.
⚖️ 📊 Why Is The Fed Rate @ 5.33% ? - Here Is The Answer🛡️ Now in the last videos, i said
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US Economy as an example take notes
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Watch this video now before you trade
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Disclaimer:
This is not financial advice
do your own research before you trade
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Do not buy or sell anything
i recommend to you
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🚫📊 **Trading Disclaimer** 🚫📊
The information provided is for
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Important Index for investorsImportant index for investors
This index will show you interest rate, world food price, US Oil, unemployment rate, inflation rate
Higher for LongerUS inflation data in July 2023 provided mixed signals. While Consumer Price Index (CPI) is moving in the right direction, producer price inflation suggest pipeline pressures are picking up. Core CPI, which excludes often-volatile food and energy costs, rose only 0.2% for a second month in a row . However, US producer prices picked up in July, owing to increases in certain service categories. This likely buys more time for the Federal Reserve (Fed) to deliberate on the future path of monetary policy.
The flows into bond exchange traded funds (ETFs) have been volatile. Over the past year, investors were starting to embrace duration. Investors were positioned for recession, inflation crash, and Fed cuts - evident from $31.7bn inflows to Treasury bond ETFs on pace for a record year2. However, investors are starting to pull out of the biggest bond ETFs devoted to Treasuries. More than $1.8 billion came out of the $39 billion iShares 20+ Year Treasury Bond ETF last week, the most since March 20203. Sentiment toward long-dated Treasuries has soured over the past month amid growing conviction that the Fed will keep interest rates at elevated levels for an extended period. We expect rates to remain higher for longer and are unlikely to see the Fed cut rates until the Q1 of next year amidst a stronger US economy.
Don’t celebrate on disinflation just yet
Overall, the US economy continues to show extraordinary resilience despite monetary constraints and credit tightening. While inflation has shown encouraging signs of decline, we caution that the level remains high. Strong July retail sales raise the risk of a re-acceleration in inflation. The four biggest categories of the ex-auto’s component saw outsized gains: non-store retailers, restaurants & bars, groceries, and general merchandise. Amidst a tight US labour market, with unemployment at historic lows and wages continuing to rise, the downward pricing momentum in the service sector is likely to be at a slower rate. Commodity prices are also beginning to rebound from the weakness seen in Q2 2023. Energy prices have been rising on the back of Organisation of Petroleum Exporting Countries and its allies (OPEC+) production cuts. If commodity prices extend their recent momentum, it could pose upside risks to inflation.
Fed Officials remain divided
Messaging on a somewhat mixed inflation outlook from the Fed Officials remains a mixed bag. One faction remains of the view that rates hikes over the past year and a half has done its job while another group contends that pausing too soon could risk inflation re-accelerating. Fed governor’s Michelle Bowman and Christopher Waller remain in the hawkish camp, hinting at more rate increases being needed to get inflation on a path down to the 2% target.
Futures markets are assigning about a 11% chance of a 25-basis-point rate hike when the Fed next meets on 19 and 20 September4. Additionally, rate cuts have now been completely taken off the table until perhaps later in the Q1 2024. The latest Fed minutes reveal commentary from officials, including the hawks, such as Neel Kashkari, suggest a willingness to pause again in September, but to leave the door open for further hikes at the upcoming meetings5.
Opportunity for a yield seeking investor
It’s been an impressive turnaround since the pandemic when negative real yields became the norm. TINA- ‘There Is No Alternative’ to equities, is over now that evidence of the shift to a 5% world appears stronger than ever. Today investors have the opportunity to lock in one of the highest yields in decades, with US two-year yields paying close to 5% exceeding the yields at longer maturities without the volatility witnessed in the 10-year sector. A resilient US economy is likely to keep interest rates and bond yields higher for longer.
Sources
1 Bureau of Labour Statistics as of 10 July 2023
2 BofA ETF Research, Bloomberg as of 9 August 2022 - 9 August 2023
3 Bloomberg as of 14 August 2023
4 Bloomberg as of 17 August 2023
5 federalreserve.gov as of 16 August 2023
This material is prepared by WisdomTree and its affiliates and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date of production and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by WisdomTree, nor any affiliate, nor any of their officers, employees or agents. Reliance upon information in this material is at the sole discretion of the reader. Past performance is not a reliable indicator of future performance.
long duration treasury bondsThe federal funds rate has never gone up this high and this steep before in history. the worse the conditions become apparent the faster they cut rates. with delayed effects of high funds rate just now showing themselves and markets/ credit contracting. Bonds are due for a guaranteed high rise that can be exited as soon as funds rate hits back to zero. I know nothing is guaranteed, but i feel this is the easiest risk adjusted return of the decade. tmf is 3x leveraged etf.
Monetary Policy: Fed Funds & UnemploymentThe unemployment rate and the federal funds effective rate are two important economic indicators that provide insights into the health of an economy, but they represent different aspects of economic activity.
Unemployment Rate:
The unemployment rate is a measure of the percentage of the labor force that is unemployed and actively seeking employment. It is a key indicator of the overall health of the labor market and can provide insights into the level of economic activity. A low unemployment rate is generally considered a positive sign, as it suggests that a larger portion of the labor force is employed and contributing to economic growth. On the other hand, a high unemployment rate can indicate economic distress and underutilization of human resources.
Federal Funds Effective Rate:
The federal funds effective rate, often referred to as the "federal funds rate," is the interest rate at which depository institutions (such as banks and credit unions) lend reserve balances to other depository institutions overnight on an uncollateralized basis. It is a key tool used by the central bank (in the United States, the Federal Reserve) to influence and control the country's monetary policy. The Federal Reserve sets a target range for the federal funds rate, and it is adjusted as a means to control inflation, stabilize the economy, and influence borrowing and spending by businesses and consumers.
Relationship Between the Two:
While the unemployment rate and the federal funds effective rate are not directly linked, they can influence each other indirectly through broader economic dynamics:
Monetary Policy Influence: The Federal Reserve uses changes in the federal funds rate to impact borrowing costs and, subsequently, economic activity. When the economy is sluggish and unemployment is high, the Fed might lower the federal funds rate to encourage borrowing and spending, which can help stimulate economic growth and job creation. Conversely, if the economy is overheating and inflation is a concern, the Fed might raise the federal funds rate to cool down economic activity and prevent excessive inflation.
Economic Conditions: Changes in the federal funds rate can affect overall economic conditions. Lowering the rate can potentially lead to increased borrowing, investment, and spending, which could contribute to job creation and, in turn, reduce the unemployment rate. Conversely, raising the rate can lead to reduced borrowing and spending, potentially impacting job creation and leading to changes in the unemployment rate.
In summary, the unemployment rate and the federal funds effective rate are distinct indicators that provide information about different aspects of the economy. While they are not directly correlated, they both play roles in shaping and reflecting the overall economic environment.
Cutting interest rates will mean hard landing is unavoidable.Look how strong the correlation is between 2y/10y spread and interest rates in the last two decades. Once it starts peaking watch it roll over slowly, a pause, usually indicates the last stages.
Central banks navigate the last stretch of the tightening cycleThis week we learnt how vital Central Bank communication is to global financial markets. The trio of central banks – The Federal Reserve (Fed), European Central Bank (ECB) and the Bank of Japan (BOJ) held their respective meetings. Each of the central banks tried to convey how they will navigate monetary policy amidst a slowing economy and avoid a hard landing.
China takes small steps to shore up the recovery
Even the People’s Bank of China (PBOC) surprised the markets this week, by announcing a cut in the 7-day Open Market Operations (OMO) by 10Bps to 1.9%1 which paved the way for another cut to the one-year medium term lending facility rate by 10Bps to 2.65%2. These recent developments mark a more proactive stance by Chinese policy makers in trying to tackle the Chinese slowdown in activity since the re-opening. Clearly more is needed. Policymakers are soliciting opinions from business leaders and economists on how to revitalise the economy in a number of urgent meetings3. While the Fed and ECB are trying to tame inflation, China has the opposite problem as inflation remains low. Manufacturing remains weak, exports are slowing, and credit growth is cooling. This is why it’s no surprise that the markets are prepping for a broader package of stimulus targeted towards the ailing property sector.
A hawkish skip for the Fed
The recent flurry of economic reports continues to show the US economy is holding up but losing steam, supporting the Fed’s approach of changing the pace of its policy tightening. The Fed kept the fed funds rate in range of 5-5.25%, by unanimous vote, in line with market expectations after 10 straight hikes dating back to March 2022.
The Fed’s dot plot showed the median rate at 5.6% versus 5.1% a month back. In the summary of economic projections, the median unemployment rate forecast was revised lower from 4.5% to 4.1% by the end of 2023 while the core inflation rate was revised higher from 3.6% to 3.9% making the case for more hikes this year. This clearly was a hawkish skip.
Fed Chairman Jerome Powell was careful to point out that no decision was made on a July hike, but he did say it is a live meeting, leading the market to increase the probability of a move. What surprised me the most, was that Powell said rate cuts would be a couple of years out which is at odds with the dot plot forecast of 100Bps of cuts in 2024.
Senior Economist to WisdomTree Jeremy Siegel believes the Fed is done hiking and that alternative inflation metrics which incorporate real time housing inputs show inflation running at 1.4% instead of 4.1%. This is based on alternative shelter inflation calculations using Case Shiller Housing and Zillow rent annualized at 0.5% instead of the 8% that is biasing Bureau of Labor Statistics (BLS) CPI higher.
ECB’s revised inflation forecasts remain at odds
After raising the deposit rate by 25Bps to 3.5%, the ECB was a lot clearer than the Fed in signalling that rate hikes are almost certain next month on July 27. The ECB remains too optimistic on growth, reducing their projection for 2023 real GDP to only 0.9% (from 1% in its March projections).
While I would agree with the ECB’s view that (1) mostly labour-intensive services will support economic growth over the next two years and (2) the current hump in wage inflation will show up via higher prices for these services, I remain sceptical amidst the global headwinds for manufacturing, and a slower pace of overall growth could keep inflation as high as the ECB now projects. While wages are likely to accelerate slightly above 5% in 2023, they should begin declining to 4% yoy by late 2024. We believe, if core inflation continues to recede in the coming months and the real economy grows at 0.4% in 2023, the ECB will stay put in September after a final move next month.
As expected, the ECB confirmed that it will stop to reinvest proceeds from maturing bonds under its standard Asset Purchase Programme (APP) from July onwards. It won’t offer new long term liquidity injections upon the expiry of the €477Bn of a TLTRO III liquidity measure on 28 June 2023.
BOJ sits tight
As expected, the BOJ kept all key policy settings unchanged, including the +/-50Bps band around the zero% Japanese Government Bond JGB yield target. Since taking the helm in April 2023, BOJ Governor Kazuo Ueda has stressed the high cost of premature tightening as the economy is finally seeing green shoots toward sustainable inflation.
In contrast to the ECB, the BoJ's latest assessment and outlook for the economy and inflation were also largely unchanged from their update in the April Outlook Report. The BoJ continues to note "extremely high uncertainties" surrounding economies and financial markets at home and abroad." Japanese equity markets reacted positively to the BOJ’s status quo stance on monetary policy. Looking ahead, the Fed’s potential pivot back to a hawkish mode versus the BOJ’s dovish perseverance could pave the way for further upside for Japanese equities owing to the underlying weakness in the Yen versus the US dollar.
Sources
1 Bloomberg on June 13, 2023
2 Bloomberg on June 15, 2023
3 Bloomberg on June 14, 2023
