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Fedfundrate

SP500 vs FedFund vs Unemp vs Yield CurveUS stocks vs the Federal Reserve Funding Rate vs the unemployment rate vs 10yr-2yr treasury yields. When the 10yr vs 2yr yield goes negative it means that a 2yr treasury bond is yielding more interest than a 10yr treasury bond and it is also known as a yield curve inversion. The red vertical lines in the chart are drawn from yield curve inversions which are usually followed by the Federal Reserve lowering interest rates, a rise in unemployment and US recessions. We're currently in a yield curve inversion that has gone more negative than the inversions just prior to the Covid panic, the 2008 financial/housing crisis and the 2000 dot-com bust which were all accompanied by record stock market losses. Maybe this time will be different...
SP:SPX
by PrepForProfit
1
FED Raises Fund Rate Today - So what Says Bitcoin (BTC)A lot of speculation and expectation around the FED raising the fund rate today and it's impact on Bitcoin's price. If you compare the fund rate and Bitcoin's price you notice there is no clear long-term correlation. I would aruge if anything then the more interesting comparison would be to compare Bitcoin (BTC) to the M2 money supply. Endless money creation correlates strongly with a rising Bitcoin price. While Bitcoin swings wildly the clear trend is up - just like the M2 money supply. Bitcoin clearly is a hedge against inflation until proven otherwise Bitcoins chart prices are pretty clear. -------------------------------------------------------------------------------------------------------- ** Please support this idea with your likes and comments, it is the best way to keep it relevant and support me. ** -------------------------------------------------------------------------------------------------------- !! Donations via TradingView coins also help me a great deal at posting more free trading content and signals here !!
BITFINEX:BTCUSDLong
by CarpeMomentum
2
Macro - Reading The CurveForecast for Macro: - Falling Wedge Breakout must be re-tested. - Bear Flattener coming as short-term rates rise with Fed tightening expectations: - 2x ATR spike in US02Y: - The Fed members will probably all have their turn to make comments, leaning hawkish. This should cause a rally in the US02Y. - Bonds Volatility Technically Bullish: - However, this will be followed by a steepener, respecting the Falling Wedge Breakout, as the Fed implements monetary policies to control Deflation, creating a Stagflation environment. - US30Y, this is bearish and deflationary: - USOIL, deflationary. The US economy depends on Oil: - US Manufacturing Employment Index, looks to be at the top of the range, and on a decline: - Capital goods are the heart of every economy. Without manufacturing employment, no capital goods. No capital goods, no innovation. - CN30Y, also bearish and deflationary: - China's Credit Impulse, and consequently - global credit impulse turns negative. - No more credit flows means no more liquidity to flow into risk assets. - M2V declining, if the economy was booming and growing, money velocity should be increasing: - Business destruction cannot be inflationary. Thriving tech businesses lead the recovery, but Tech is inherently deflationary. - Reading the curve will be critical to see the macro turns coming! GLHF - DPT
TVC:US05Y
by UnknownUnicorn1043646
1
NASDAQ- TINA?Sure, low yield rate alone doesn’t justify the extremely high valuation of NASDAQ, but many investors may have overlooked other factors that may have contributed to NDX's rise. Quick recap of recent macro events- THE BAD Corporate profits in the United States dropped 11.8 percent to USD 1,569.2 billion in the second half of 2020, following a downwardly revised 11 percent fall in the previous period, a preliminary estimate showed. It was the sharpest decline in corporate profits since the last quarter of 2008, amid the coronavirus crisis. According to association of corporate growth, 81% of middle-sized business failed to get a loan through the Fed’s Main Street lending program. Of course, survey might contain the selection bias. According to S&P Global Market Intelligence, U.S. bankruptcies are on pace to hit their worst levels in 10 years , with experts expecting even more companies to suffer as the coronavirus pandemic stifles economic activity. A total of 424 companies have gone bankrupt this year as of Aug. 9. Over 100 consumer-focused companies have gone bankrupt this year already. Industrials and energy combined account for nearly 100 bankruptcies. Overall, 35 companies that filed for bankruptcies year-to-date reported more than $1 billion in liabilities. THE GOOD Out of the 35 companies that filed for bankruptcies year-to-date and reported more than $1 billion in liabilities, none came from IT. Overall, only 17 out of 424 companies that have gone bankrupt this year came from information technology. Most came from large retail, energy, and transportation. Of course, when a big portion of sectors becomes highly unprofitable, investor's money would appropriately reward ones that remain profitable. According to the Mortgage Bankers Association, The forbearance rate for mortgages backed by Fannie Mae and Freddie Mac dropped to 4.94% in the first week of August, the first time it’s been below 5% since April. Almost all housing indicators are up except mortgage origination rate. THE INEVITABLE In my opinion, the potential acceleration of industry consolidation is a bigger concern than dislocation. J&J and Apple, for example, are able to get 40yr loan at 3-4 percent interest rate. Low interest rate encourages big firms to refinance and borrow so they can more easily build up large cash cushion for M&A pursuit which ultimately might hurt consumers. According to American association of individual investors’s July asset allocation survey, individual investors’ exposure to fixed-income assets declined to its lowest level in 15 months. Again, no one likes low yield rate and I would guess most money go into the equity market especially profitable sectors such as tech. Some investors are still hoping for the dip back to the March lvl. According to research note from Bank of America securities, since 1928, the 30% market drawdown happens once every decade and the average time for the market to bounce back after a drawdown of 20% or more is 4.4 years. The two most similar situations in terms of magnitude of drawdown happened in 1987 & 1968 and it took them 101 days and 543 days respectively before the bottom was reached. Many of us thought this time would be the same especially since rarely has the bottom been reached at the onset of recession. Well, guess what? Many of us have been fooled into believing that this time would be no different without realizing the underlying condition has changed... There was no QE back then. Past doesn’t always predict the future especially if the underlying condition no longer applies. Despite of the string of bad macro signals I listed above, market remains unfazed and marches on. No party can last forever though. I believe that such a meteoric rise in tech stocks will come at the expense of long-term return as high valuation today leads to weak return tomorrow. Inevitably, valuation mean will one day revert lower to stay in line with historical trends. However, none of us knows exactly when it will happen. Therefore, waiting on the sideline, incurring the opportunity cost and missing out on all the gain is not the way to go either. Time like this is why risk management and asset allocation matter.
TVC:NDQ
by Libratus
Zero/Negative Rates Don't Work - Savings Rate - BuybacksQuick one here, given the world looks set to resume it's ludicrous experiment with negative rates in order to spur "growth" and encourage spending. I thought it was only reasonable to see what effect the past decade of ZIRP (Zero Interest Rate Policy) has had on the personal savings rate. Before we begin, i understand that the fed funds rate is not the explicit rate at which retail individuals are able to take loans out, but it is the internal cost of money for banks, i.e. the lower the fed funds, the lower the rate at which the banks would need to make loans in order to be profitable (in theory). As we can see, the savings rate and the fed funds rate moved, very loosely in the same direction all the way up to the GFC. At this point the fed started QE and introduced ZIRP in an attempt to coax the public into taking on more debt and going into the real economy and spending money. But rather, the public began to increase their savings rate, in other words, the fed's plan backfired. In fact, the only real boost from the low rates has been from corporate buybacks, with buyback programs and corporate stock purchases being the largest contributor to the (now dead) bull market. So one has to wonder, what was the purpose behind the artificially low rates? I adhere to the view that if you are in doubt as to the motivation for a particular action, look at the consequence and infer motive from the outcome. When viewed through this lens the fed's motive for lowering rates was to bailout corporate America and further enrich the executives, CEOs and directors, aided by free money with which they gave themselves golden parachutes, share buybacks and generous bonuses. Hmm... I guess ZIRP, QE and the other programs the fed rolled out in 2008 onwards was a stunning success then. -TradingEdge Corporations buying their stock back www.zerohedge.com
FRED:PSAVERT
by Profit_Link
1
S&P500 vs Fed Fund Rate#spx #sp500 #fedfundrate - The Federal Reserve lowered the Federal Fund Rate today from 1.5% to 1% in the first rate cut outside of an FOMC meeting since Lehman Brothers collapsed in 2008. This came as the Federal Reserve Chairman, Jerome Powell, claimed that the economy is doing fine and unemployment is at a multi-decade low. If everything is so “fine”, then why the need for a rate cut? Why the need for a rate cut two weeks before the next FOMC meeting where interest rates and monetary policy are supposed to be decided? This is one of those instances where you need to be paying attention to what they are doing rather than listening to what they are saying. At no point in the past has the Federal Reserve, or any other government official/agency, ever come out and warned the public in advance of potential systematic dangers in the economy or stock market. Doing so would be a self-fulling prophecy and cause investors to begin selling immediately. The past two instances the Federal Reserve was in heavy rate-cutting cycles were during the 2000 dot.com bust and again during the 2008 housing and financial crisis. If there is no crisis right now, then why are they employing crisis-level measures? Which fire are they attempting to extinguish before we see the smoke or hear the alarms? During the two previous market crashes the Federal Reserve had to lower the Federal Funding Rate by 5% in order to calm markets. During the 2000 crisis we saw rates drop from 6% to 1%, and during the 2008 crisis rates fell from 5% to 0% where they stayed for nearly 10 years before being raised back to 1% in 2017. Rates topped out at 2.5% in 2019 which was the same year that the Federal Reserve began lowering again, three rate cuts in fact were seen in 2019. If we can expect another -5% rate cut to calm whatever crisis we’re facing this time around it indicates that we’ll be seeing negative interest rates before all is said and done since a 5% cut from a peak this time of 2.5% = -2.5%. This would be a new paradigm for the US financial system. Get ready for volatility in stock prices as traders attempt to decipher what is really going on at the Federal Reserve and why they felt the sudden need for an interest rate cut. Covid19 fears appear to be weighing heavily on global markets which could be the cause for the rate cut as the Federal Reserve might be attempting to front-run what is likely to be a major slowdown in economic activity, not just in the US, but throughout the globe. China basically coming to a halt in production will most certainly send ripple affects throughout the world as global supply chains are being disrupted. China is the #2 economy in the world and the #1 producer of raw materials/goods that the rest of the world depends on in order to maintain their respective economies. If businesses around the world are unable to obtain the products from China that they require in order to run their operations it likely means that we are heading for another recession and new round of layoffs across the board. Expect another rate cut in two weeks when the Federal Reserve conducts their FOMC meeting.
SP:SPX
by PrepForProfit
2
Macro Deep Dive - SPX, Initial Claims, Yield Curve and Fed FundsCharts: - Top left = SPX - Bottom left = Initial jobless claims (unemployment metric) - Top right = US 10 year and US 2 year spread (Yield curve inversion metric) - Bottom right = Fed funds rate (short-term interest rates) It is no secret that US equities are grossly overvalued, from Warren Buffet to Stanley Druckenmiller to Ray Dalio, the smart money has made their case for why US stocks simply cannot justify their valuations indefinitely. Yet Stocks continue higher, largely due to massive CB liquidity, spurred on from fears of a global slowdown and the ensuing economic impact this would have on such indebted nations and consumer, this coupled with the supply chain shock that the Corona-Virus is undoubtedly having on global trade is a recipe for disaster. So what are the macro/ recession indicators saying? They are flashing red. The Initial claims are at record lows, which sounds fantastic, until you realize that most major recessions and even depressions are accompanied with low, not high, unemployment. Recessions strike when everyone is complacent, when they are fat and happy and when they have their blinders on. I will be watching the initial claims and will look for the the claims to spike and reverse trend, as this is a much stronger indicator of structural weakness within the economy. Moving over the the US10y/ US02y spread, it is well known that the yield curve briefly inverted in 2019, however, the initial inversion is not the point to sell, this is due to the yield curve inversion being a leading indicator of recession. Historically, from the point of first inversion to the inevitable decline in equities, is roughly 12 months to 18 months. We are 7 months into the initial inversion and the yield curve looks like it is going to invert yet again. Finally we have the Fed funds rate, the targeted overnight lending rate for the Federal Reserve. The trend is clearly down, down, down with rates this has been rocket fuel for bonds which are now traded akin to equities for capital appreciation, rather than the interest bearing assets they were designed as. Furthermore, and perhaps most interestingly, it is not the point where rates are raised that signal trouble for stocks, but rather once the Fed pivots and reverses course and begins easing and lowering rates, THIS, not the rate hikes is the signal to watch for. It comes as no surprise then, that interest rate cuts have not only begun, but are in full swing, with further rate cuts this year, already being priced in. The macro outlook looks bleak, this bubble CANNOT last forever, however i firmly believe that the Banksters will not let this bubble burst without a fight, a global slowdown, coupled with global equity markets crashing would cause widespread panic and in some places, riots. So keep an eye out for the helicopter drop of money coupled with bail ins, bail outs and of course, more QE. -TradingEdge
TVC:US10Y
by Profit_Link
4