The Fed Is About to Repeat History

With traders still betting on a quarter-point rate cut in September, we have just one simple question: Why?

After all, gold is near all-time highs. Ditto stocks. Even bitcoin, which hit an all-time high last week and is only down 8%.

The fact of the matter is, the Fed has a history of cutting interest rates while assets are still trending higher, if not near or at all-time highs:

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The Fed has often cut interest rates near market highs. (Source: Barchart)

But the good news for investors: 20 out of the past 20 times the Fed has cut rates near all-time highs, stocks have been higher a year later.

The issue? Most of those rate cuts came during the 1980s and 1990s, as inflation continued to tick down, justifying lower Fed fund rates.

Today, with inflation still on the higher end of the Fed’s target, and possibly even starting to track higher, it’s not quite an apples-to-apples comparison.

~ Andrew

P.S. Rate cuts are coming whether we like it or not — it’s just a question of the timing.

But depending on the speed and size of those cuts, they risk kicking off a “most terrifying bull market” in stocks, which sends those valuations into the stratosphere before they come crashing down to earth. And it could help gold push higher.

In short, investors won’t be in stocks because they want to, but because alternatives, like holding money in cash, will just look too risky.

If you have any questions for us about the market, send them our way now to: Addison@GreySwanFraternity.com.

With traders still betting on a quarter-point rate cut in September, we have just one simple question: Why?

After all, gold is near all-time highs. Ditto stocks. Even bitcoin, which hit an all-time high last week and is only down 8%.

The fact of the matter is, the Fed has a history of cutting interest rates while assets are still trending higher, if not near or at all-time highs:

Turn Your Images On

The Fed has often cut interest rates near market highs. (Source: Barchart)

But the good news for investors: 20 out of the past 20 times the Fed has cut rates near all-time highs, stocks have been higher a year later.

The issue? Most of those rate cuts came during the 1980s and 1990s, as inflation continued to tick down, justifying lower Fed fund rates.

Today, with inflation still on the higher end of the Fed’s target, and possibly even starting to track higher, it’s not quite an apples-to-apples comparison.

~ Andrew

P.S. Rate cuts are coming whether we like it or not — it’s just a question of the timing.

In short, investors won’t be in stocks because they want to, but because alternatives, like holding money in cash, will just look too risky.

If you have any questions for us about the market, send them our way now to: Addison@GreySwanFraternity.com.

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Gold has been consolidating after a powerful multiyear rally. Yet with America’s gold reserves equal to only about 3% of federal debt, the metal could still have significant upside ahead.

The Federal Reserve can print money, but it can’t print oil. As energy prices surge and supply disruptions loom, the central bank may find itself with limited tools to fight inflation driven by real-world shortages.

The plan to release 172 million barrels from the Strategic Petroleum Reserve would leave the U.S. with its smallest stockpile of emergency oil in more than four decades. And with tensions simmering globally, the shrinking reserve raises uncomfortable questions about how prepared the U.S. is for the next supply disruption…

Gold has been consolidating after a powerful multiyear rally. Yet with America’s gold reserves equal to only about 3% of federal debt, the metal could still have significant upside ahead.