If you follow the financial headlines, you must be confused.
Everybody expected the Fed to cut interest rates soon and to do it quickly.
At the beginning of the year, markets were “pricing in” up to six cuts.
Well, now the Fed’s tone has changed, and the markets are confused.
We’re in uncharted territory again. Right?
Well, if you listen to the mainstream media commentary, we are… but not if you invest based on what the 18.6-year real estate cycle suggests.
So What’s the Confusion?
This week, the Fed’s chairman Jerome Powell said that interest rates could stay “higher for longer.”
The problem is inflation. It’s not slowing down to the Fed’s preferred 2% annual rate as quickly as it would like.
Powell says that he doesn’t know how long it will take…
It’s not saying it would hike again… but it’s not keen to ease financial conditions either.
Investors are confused and upset.
They are buying safe assets such as the U.S. dollar and gold… and selling equities.
We’ve been here so many times…
But the markets never fail to learn.
Most investors think that markets and economies go through cycles of growth and decline.
And they in fact do, but not quite in the way most investors expect.
If you have not noticed, for example, the U.S. economy is running hot. Unemployment is low, growth is here… it’s expanding. So that’s good news.
But the interest rate cycle is what’s on everybody’s mind. And a lot of investors think that they know what’s going to happen, or at least the Fed does.
Nobody Knows Except…
The truth is that there is no such thing as an interest rate cycle.
We’re not at the end of some “hiking” stage that absolutely has to turn into a “cutting” stage.
I understand why investors feel that way. They desperately want good news… and they think that as soon as the Fed starts cutting, markets will rally.
Well, there is good news, but it has nothing to do with the Fed.
The good news is that the 18.6-year real estate cycle, which I used throughout my career to invest, tells me that we’re in a good spot.
We’re in the spot I call the “Eleventh Hour.” Most assets grow at this stage, liquidity is abundant, and the economy is doing well.
If you ignore day-to-day noise, you’ll see that that’s exactly what’s happening.
And I’m not worried about the Fed. It will cut at some point, which will only add more liquidity to the system.
But until then I don’t want to miss out on the opportunities that I see in the markets right now. While other investors are selling, I am looking to buy.
My readers know that, and I am happy to help them navigate the 18.6-year cycle as well. As the cycle turns, we could all be better off in the end.
Regards,
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Phil Anderson
Contributing Editor, Inside Wall Street with Nomi Prins