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Effective Federal Funds Rate

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FEDFUNDS trade ideas

GOLD, SPX AND FUND RATES/QEAs mentioned in the previous idea, for Gold to go up we need 2 factors: 1 - market crash from hyperinflated values 2 - fed intervention in the form of rates cut / quantitative easing to make it attractive I would not consider what happened to gold before 2006, when it seems that it is perfectly correlated with spx, simply because in 2000 an ETF on gold was introduced, bringing in a lot of liquidity to the underlying. Before it was difficult to buy gold if not with futures. It became mainstream. Let's concentrate on what happened from 2007 onwards, without concentrating too much on levels, but more on timings in a cause-effect analysis. Spx was coming from a 4-year bull run after the .com bubble, prices were going beyond any common sense, bubble fears were increasing, interest rates were high at 5.25%: all the ingredients for a recession were there. After freddy mac and fanny mae defaults, FED started to cut rates until the abrupt cut from 4 to almost 0 in Nov 08, which was "incidentatally" the point in which gold reached its local mininum and experienced its bigger loss in years. Until rates are not cut indeed, a financial crisis itself does not make gold attractive to investors, as their liquidity can be used with bigger returns elsewhere (also it is needed to keep the business open in the intitial phase of the downturn). The market continued to fall until march 09, while gold started its incredible run to 1900usd. In 2012, when the FED announced a progressive return to "normal" rates situation, gold started to decline and fell asleep for many years as no more attractive to investors during the EVERYTHING BUBBLE. Until 2019, when, amid bullish markets, fears of another recession started to mount again. Everytime gold, even if sleeping, sets to a higher level: 600 in 2008, 1000 in 2015, 1400 could be the one at the present time. Now, markets are crashing and FED just announced a rate cut to 0. Can you see the dejavu?
FRED:FEDFUNDS
by edutradinguru
2
Financial Shock Indicator - Recession Prediction ToolI've been looking around for various data tools to indicate recessions catalysts and their relationships to financial indicators over the past few months. From those efforts, I've honed in on a particularly interesting ratio that seems to indicate financial shocks that spark recessions (indicated with green shading). It looks like when you take the Fed's Interest Rate (FEDFUNDS) and divide that by the spread of the 10Y (TYX) and 5Y (FVX) treasury bond you get inverted peaks that mark times when a severe financial shock has been applied to the US economy. The delineating factor on if it will truly trigger a recession or not, I think, hinges on the nature of the disruption. You can see with the Clinton Impeachment, there wasn't a resulting recession. There were issues present the caused the fed to cut rates during those times, but apparently the cause wasn't significant enough (Asian and Russian Financial Crisis). So, I ask myself, is Trump's Tariff War significant enough of a shock to trigger a recession? The Q3 GDP doesn't seem to indicate it, but a look back at the 2000 bubble shows a similar trend. Trump's Tax Cut (giving a boost to the GDP in a low sales time period) may be insulating the US economy from a true recession, but it's not clear. There may be a better data set to plot this out further, which I'll be working on, to see how it aligns with more than the previous 2 recessions but I wanted to get this out there for people to weigh and challenge. My other comment regarding applicability is that Cam Harvey's inverted yield curve can be set up with a variety of combinations. In the Duke article published in July of 2019, Harvey himself describes the recession indicating inverted yield curve as the difference between the 10 year and 3 month treasury bill in an inverted state for an entire quarter. That event did not occur in 1998. So, the combination of the Financial Shock Indicator with a preceding inverted 10yr-3m yield curve for more than a quarter gives you a 100% chance of recession (from an n=2). Either way, I think my Financial Shock Indicator, when used with the inverted yield curve, may be indicative of true recession predictions. But we'll see how it turns out.
FRED:FEDFUNDS
by InvestingIsAScience
2
Fed Funds Rate- Interesting patternsWas just taking a look at the rate and noticed the EMA. 200 EMA is currently at 1.71 with the 10 day at 1.86. Black horizontal lines are approximate time when 10 day crossed below 200 day. Purple are the listed start of a recession. Just found this interesting and especially since it's on 15 bp away from crossing to the downside again. You'll also notice that it crosses back down within 6-12 months of crossing to the upside (in the last 30 years). 1977-1985 are exceptions to the 6-12 months and did not cross to the downside around a recession (recession of 1980 and 81-82 fell in between) Take this how you'd like, but it's definitely a good idea to at least take something (whether bullish or bearish) from this.
FRED:FEDFUNDS
by MichaelMF
4
Fed Funds RateGoing to 0 and beyond. One of the few charts that can go in the negative. Lower highs and lower lows for 30 years. Once the market catches wind of lower interest rates it can't get enough. It's a race to the bottom for all developed world interest rates. To full investment and then what happens? The real problem is the velocity of money keeps dropping with every drop in interest rates. Why sell something if it is always going to be worth more? The only answer is to buy Bitcoin of course.
FRED:FEDFUNDSShort
by ngordon
Fed Funds Rate Predicts Market Downturns?The last couple of times there were financial problems with the Fed and they started messing with rates. As you can see each time there is a down turn in recent history we've had historical corrections to the down side or extreme bear markets. It looks like we're rolling over yet one more time. What will they do tomorrow? Lower the rates? Start up QE Infinity? Everything is in bubble territory. I remain long on metals. Stay safe everyone
FRED:FEDFUNDSShort
by SuddenFX
1
Have Federal Interest Rates Peaked? -1.8% projection.Simple chart showing the federal funds rates since 1955. As you can see the rate is currently in a falling wedge pattern which should eventually break to the upside. However given the conditions of the global economy, for now, we may very well be at the peak at the top of the channel with a downward move pending. If this happens to be the peak and feds continue to cut rates from here, we could see interest rates at -1.8% or lower by the end 2020 / beginning of 2021. The time is derived by the last two drops from the top to the bottom of the channel which took ~460 days.
FRED:FEDFUNDSShort
by ttrending
RECESSION IMPENDING?(PART2)FED RATES SUPERCYCLE|PREMIUM ANALYSISFED INTEREST RATES( FRED ) - Extension(PART 2) to the US (SPX) Sectors Technical Analysis Series - 18th of August 2019 (9-10 Minute Read) Everyone complains about the FED rates. That's our only job, it seems . Judging by his tweets, no one has been more eager to express their dissatisfaction, than Pres. Trump (bit' of sarcasm) . This is Part 2 - of an extremely complex(Premium) cycle analysis . The purpose of this chart is to showcase the historical relationship between FED Rates and economic cycles . In order to understand this analysis; in depth historical knowledge of the FED's Monetary Policy is necessary (besides my personal need, of my work actually being understood properly). Now, let's start with a chronological setup(Blue #number labels) that will be used to analyse rates. The beginning of the Bullish Cone was the Impulsive Intermediate Wave 1(in the late 50's ). By the early 70's and the occurrence of the OPEC crisis ; a supercyclical Wave 1 and 2 were formed. Wave 2 gave the bottom support of the Bullish cone in FED interest rates. As it's labelled on the chart the importance of the bullish cone is that it signifies the Peak of Capitalism . The implications of this peak were a consumption driven economy, combined with excessive cycle volatility. At the same time this was the Fixed Incomes' Golden Age ; as practically every American individual was told that buying a house is the utmost important aim in life. Obviously at the time, this was quite logical, since home equity is an effective way to protect your wealth from inflation. The Fibonacci Circles used on the chart show the pattern of cycles that formed the Bullish Cone. Each end of a circle forms a trough and consequently a peak in a given cycle time span. What Changed ? - Our understanding of Monetary policy changed (Credit to Barro and Gordon,1983) . The early 80's were extremely turbulent years with immensely high inflation . The end result was an exit out of the old equilibrium and a break-off from the Bullish Cone, into a new Equilibrium . The trend that formed the New Equilibrium in general economic terms is referred to as the "Great Moderation" . This is why the chart is divided with a cross, centered around Q2,1984 that was the start of the "Great Moderation". The occurrence of this event can be observed in the clear difference with the synch of the sin-line with the different cycles between the 2 periods. The new equilibrium is extensively supported by the rise of Globalization . In effect this is the first part of this analysis. Part 2 of this analysis is, what started this idea with the downward trending wedge ( Pitchfork ) in interest rates since the "Great Moderation". This was my primary sketch from a week ago. Just so, I am not boring and do not repeat myself- I will not discuss the labels post 84' neither on the sketch or the chart. What is important in the current interest rate environment are the implications of the prolong duration of these extremely low rates . Hence, the chart is divided between 2% and below(RED) and above Green . The rationale behind this division, is that there are plenty of fundamental issues that appear if rates are lower than 2%(in addition to low growth/inflation). Unfortunately we've practically been in such environment for about 9 years now . Implications of this environment can be credited to James Bullards (2016) "Perma-Zero" paper. One of the major issues is the trade-off between debt and equity . In the current environment stocks on average are trading 14-17 x(times) their earnings (x17 P/E) . We have an enormous amount of laughable companies available to stay in business with continuously negative EPS . One example that I can think of is WeWork Ltd . (In order to spread awareness, I need your help on this one- comment as many companies that come on you mind that fit this description) . This is a healthy and necessary discussion to have . Low rates do stimulate innovation, but the inevitable cost is that due to competition- the majority of these startups become unproductive and hardly ever profitable.The best description that I think it fits these worthless capital soaking "Business Ideas" is to classify them as Malinvestments . Finally, what's the conclusion of this extensive FED rates analysis? - Borrowing Capital should have some baseline cost (2-4% would be quite an optimal range) . As discussed in Link #1 and Part 1 of this series based on the VIX that analysed the probability and timing of the next recession; - I t is nearing . Unfortunately, we will not have rate cuts as a tool to stimulate the markets. Whether it is obvious or not; we are quite overdue for a recession . This can also be observed from the sin-line at the bottom right corner; implying a bottom of the cycle in the next 2-3 years . Essentially, this is the reason- why I have dedicated much of my time to at least attempt to provide a series of ideas in my content, that include proper interpretation of the most crucial financial and economic factors . This idea concludes the extension to the SPX Sector series. Hope you enjoyed it and found it useful. |Step_Ahead_oftheMarket| >>I do not share my ideas for the likes or the views. This channel is only dedicated to well informed research and other noteworthy and interesting market stories.>> However, if you'd like to support me and get informed in the greatest of details, every thumbs up or follow is greatly appreciated ! I do realize that my charts are quite hard to be understood, mostly because they are labelled to the smallest and extremest of details. If there are any poor understandings of the labels, I'd be able to answer any additional questions in the comments. {Make sure to check out my previous ideas and my series on US( SPX ) Sector including 11 episodes of the major US sectors} 1. PART 1-VIX: Volatility Index 2. Series Finale ; Episode 11: US Utilities( XLU ) 3. SPX : Elliott Wave Analysis of the current Cycle Full Disclosure : This is just an opinion, you decide what to do with your own money. For any further references or use of my content for private or corporate purposes- contact me through any of my social media channels. Wish that tview had a copy-right option, but it is what it is.
FRED:FEDFUNDSShort
by step_ahead_ofthemarket
4