It seems counter-intuitive, but as America’s economy kicks back into gear, the stock market could tumble as a result.
The market maintained its downward movement yesterday, as the S&P 500, the Dow, and the Nasdaq each opened lower once again.
You would think that the COVID-19 vaccination efforts across the globe, and the economic recovery that will follow, would be enough to make investors bullish.
But there’s a side effect to that economic recovery that’s putting a ton of selling pressure on the market right now.
I’m talking about interest rates.
With expectations for an improving economy, plus an upcoming boom in infrastructure spending, inflation is sure to be on the rise. To control inflation, the Federal Reserve adjusts interest rates.
Yesterday, the 10-year Treasury yield rose to as high as 1.776%, its highest level in 14 months.
Here’s why that has Wall Street on edge…
Where’s the money?
Its no surprise that interest rates are on the rise ahead of what’s expected to be a more than $3 trillion infrastructure spending plan. The efforts are aimed at not only updating America’s aging infrastructure, but also creating thousands of jobs and kickstarting the economic recovery.
To keep the value of the dollar from falling too far as more Americans return to work and have more money to spend, the Fed will attempt to keep inflation at a preferred level by making the cost of borrowing money greater. That increase in cost then has a ripple effect that is felt throughout the economy.
Higher interest rates affect both companies and individuals, but the bottom line is that both are able to borrow less, limiting their ability to spend and expand.
And as analysts believe that the 10-year yield may be headed north of 2% later this year, many investors are seeing this as a good time to move to the sidelines or even get short.
Here’s what I think…
How do I get some?
The stock market is showing even more weakness as we see the 10-year interest rate get above 1.75%.
This means that the interest rate on the 10-year has now moved up 300% in less than 18 months, signaling that the glut of corporate spending we’ve seen over the last year could soon slow down in a big way.
I think the stock market will sell-off hard after the end of the quarter as investors look to take profits. In fact, I think end of the quarter buying is the only thing holding us up for now – which actually is providing a great opportunity for the trade recommendation I have for you today.
Whenever we see yields on Treasury bonds increase, the price of those bonds falls. I believe interest rates will continue to move up, and that’s why I’m recommending buying out of the money put spreads on the iShares 20+ Year Treasury Bond ETF (TLT).
2021 Figures to be a wild and lucrative year
As we head into an economic recovery on a scale not seen in decades, there’s sure to be a ton of market volatility.
And picking stocks solely on the headlines is almost certainly a recipe for disaster. What allowed me to make a fortune in the market is simple. Follow the money.
Knowing where the biggest Wall Street institutions are moving their money can give you a huge advantage over the rest of the market.
And that’s where S.C.A.N. comes in…
Using the incredible power of this proprietary system, I’m able to track the largest money inflows and outflows in real-time – giving me invaluable insights on which stocks are poised for huge movements.
And once S.C.A.N. has helped me to identify the best profit opportunities, Project 303 subscribers only need a matter of minutes to use my detailed instructions to enter trades that give them the chance to double their money – sometimes in just a matter of days.
Want to know more about how I do it? Click here and I’ll show you everything…
In the Spotlight: The U.S. Could Be Going Green…
New York could become the latest state to pass cannabis legalization legislation – pending the results of a vote this week – making it the 15th state to do so.
And plenty of lucrative trades could be on the horizon.
With many more similar state legalization bills having already been proposed this year, and with Federal decriminalization a real possibility, there is a huge amount of renewed interest in the cannabis industry.
We could be on the cusp of yet another cannabis “gold rush” as investors look to set themselves up for tremendous gains from the sweeping legal reforms.
This is an industry I have a very close eye on, and I’ll be sure to keep you updated with all of the latest news and best profit opportunities as we go along. Stay tuned…