On Wednesday, the Federal Reserve basically promised to lower interest rates two or three times before the end of the year and the markets rallied big time on that news only to dump yesterday, with the DOW falling at one point over 700 points.

Rate cuts can be bullish for the markets and bearish.

They are bearish if the Fed is forced to lower rates due to stock market turmoil or a recession, but bullish if that doesn’t happen.

There was poor industrial manufacturing numbers that came out before the market open yesterday, that suggest that a recession is happening in that sector of the economy.

That spooked stock traders or did they just want to take profits on a highly valued market again?

If it’s just some profit taking buyers will come in again.

One thing, though, the Fed Fund futures are now predicting a 100% chance of a rate cut in September and have priced in two more after that,

What I have above is an the image of the Fed Fund futures for December, which have a 64% chance of interest rates being at 4.50-4.75% after that meeting.

They are currently at 5.25-5.50% - so that’s three certain rate cuts they have priced in, because they have priced in no chance of them being higher than 4.50-4.75%.

They are pricing in even more rate cuts for next year too, but when you look that far out the Fed Fund futures don’t really have that much predictive value.

What they are saying for sure is that rates are not going up next year after being lowered this year.

Interest rates cuts are bullish if it’s only going to be three rate cuts on this rate reduction cycle, but if it’s more than that it’s likely to be a recession that causes more to happen, which would be very bad for the stock market.

The stock market is hitting a speed bump right now, let’s just hope that is all that it is and the buying rotation we saw last month starts back up again soon.

It probably will.

We’ll probably get a rally into that September FOMC meeting once the market gets it’s footing back here.

Not everything is falling.

Shares of gold giant Newmont Mining went up 0.98% again yesterday.

I own NEM.

The Nasdaq futures are down before the open today, but gold and silver are both up again.

And utility stocks went up yesterday, with XLU making a new high.

Utilities tend to go up during interest rate reduction cycles and started to go up way ahead of this coming September interest rate cut.

If you follow the puck you can make money even when the stock market struggles.

The last thing you want to do, though, are own things that have been lagging the market, performing worse than the S&P 500, if a big correction comes, because those things typically fall even worse.

Virtual crypto coins destroy portfolios during corrections and bear markets, because they are the most speculative element in the financial markets, representing ownership of nothing in the real world.

Notice, even though gold is going up everyone is still ignoring it in the financial media.

No “AI” was used to write this email or edit it.

And…..

I wrote yesterday that you might want to start to lock in current yields by buying some bonds and CD’s right now.

Yields fell yesterday after I wrote that, but this message is still important today!

In fact, yesterday, I sold a few positions I have losses on to move that money into some CD’s and lock in those yields myself!

-Mike

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