Maria’s Note: Welcome to a special evening edition of Inside Wall Street with Nomi Prins…
I’m sure you’ve heard the news by now…
The Federal Reserve just raised interest rates by 0.75%. That’s its biggest one-time hike in 28 years. But as Nomi told me earlier today, she’s not worried about this… And you shouldn’t be, either.
See, TONIGHT at 8 p.m. ET, Nomi will unveil a proprietary new strategy that can help you take advantage of these volatile markets – no matter what the Fed does next.
It’s based on the same type of strategy that big banks paid her millions to develop during her 15 years on Wall Street.
It can help you make up to 10x your money, whether the markets go up or down.
And with the stock market plunging into bear market territory this week, and further volatility to come… I encourage you to tune in.
To automatically save your spot for Nomi’s special briefing tonight, just click here.
Then read on below, for Nomi’s take on why the Fed’s actions (and inactions) have actually created The Great Distortion we face today… And how she believes the Fed’s cat-and-mouse game with the markets will play out…
If you have money invested in stocks, you may have had some sleepless nights over the last few months.
Yesterday, the S&P 500 officially entered bear market territory. At writing, it’s down 21% year-to-date.
The Dow is down 16%. And the tech-heavy Nasdaq is down 29%.
Violent swings several percentage points a day in either direction have been all too common.
On top of that, we’ve seen the highest inflation readings in four decades.
And to combat that, the Federal Reserve is raising interest rates. Today, it announced a 0.75% hike… on top of May’s 0.50% hike and March’s 0.25% hike.
Which has been spooking the market these past few months…
So your day-to-day spending is up, while your investment portfolio is likely down.
That’s a double-whammy for your money. And no doubt, you’re wondering what to do…
So today, I want to explain what’s going on in the markets. I’ll show you why you shouldn’t join the mass exodus from stocks…
And why what’s happening is actually creating opportunity for those who know where to look.
Markets Hate Uncertainty
Basically, investors have been caught up in a storm of fear. It’s mostly over the Fed’s next moves.
Markets hate uncertainty. That’s why they’ve been down so much recently. It’s also why they rallied on the back of the Fed’s announcement today.
The thing is, the Fed’s current policy will continue to provoke this sort of uncertainty in the near term.
Ultimately, the markets want to know whether the Fed will embark on a longer-term path of aggressively raising rates… and when it will stop. And whether it will significantly reduce the size of its $9 trillion book of assets.
Yes, there are other issues weighing on the market’s mind, such as inflation, the war in Ukraine, more supply chain disruptions, and potential recession.
But the market is most concerned about the Fed.
See, the Fed took a “wait and see” approach to rising inflation in 2021, rather than actually doing something about it while it could.
Only when inflation had exploded – higher than it had in over four decades – did the Fed finally kick into gear… sort of.
In March, it raised interest rates by 0.25%. In May, it raised them by 0.50%. That was its biggest rate hike in 22 years.
And today, it raised rates by another 0.75%. That’s its biggest one-time hike in 28 years.
Now, that might seem like a really big deal. But as I said live on Fox Business earlier today, it isn’t.
Nomi gives her take on the Fed’s rate hikes on Fox Business
That’s because before that, interest rates were at zero, more or less. So, including today’s announcement, they’re now in the range between 1.5% and 1.75%.
The Fed expects to end the year at around 3.4%. So it’s saying there are several rate hikes yet to come…
But some readers may remember when interest rates were around 20% – in the Fed’s attempt to fight the double-digit inflation of the 1980s.
So the cost of money is still hovering around historically cheap levels.
And the Fed’s book of assets is still nearly $9 trillion. You can see that – and the massive hike courtesy of its quantitative easing (QE) – in the chart below.
Now, the Fed has been talking about reducing its balance sheet of late. But don’t be fooled. It’s not actively selling any of its $9 trillion worth of assets at this point.
Instead, it’s letting bonds on its books mature naturally, or “roll off.” It’s not replacing them with new ones.
That roll-off could result in up to $95 billion per month of quantitative tightening (QT) by August.
At that rate, it would take four years for the Fed’s book to get down to pre-pandemic levels. A lot can happen in four years.
This brings me to something important I want to talk to you about.
The Fed’s Dilemma
The first rule about the Fed is to watch what it does, not what it says.
Now, every so often, those two things will be the same. But what the Fed does is key.
The Fed ignored inflation building in the real world for a year before it did anything at all on rates.
Before that, it ignored the inflation of assets in the financial realm for many years.
This is all part of what I call The Great Distortion.
It’s a permanent disconnect between the markets and the real economy.
And it happened because the Fed and other central banks fabricated trillions of dollars.
That money has flowed into the markets instead of the real economy.
And while the economy is facing real inflation in things from fuel to food… the Fed can’t actually do anything about that.
As I said on Fox, the Fed can’t plow wheat farms or produce oil wells – even if it tries to fight inflation by raising rates.
You see, while the Fed’s money was flowing in the wake of the pandemic…
The economy was suffering from closures, supply shocks, and ongoing supply chain disruptions. And from real inflation in everything from gas to food. It still is.
But the Fed is stuck in a Catch-22 of its own making. It adopted an epically cheap monetary policy in 2008. And now, it can’t back down.
(I’m holding a special investment briefing with more on this tonight at 8 p.m. ET… Including what I believe the Fed will do next. So be sure to automatically save your spot here.)
Today, Fed leaders talk about being more aggressive with rate hikes (for example, 0.75% at a time) and the speed of QT going forward.
But even if the Fed does go ahead with its plans to raise rates to 3.4% this year, the cost of money is still historically cheap.
And a major portion of its epic money fabrication remains in play for Wall Street and for the markets.
That’s why, at the end of the day, even with all the market volatility we’ve seen, markets will still have a cheap money supply.
That provides them with this massive trampoline. And if history is any guide, they will bounce back even stronger from today’s volatility…
Cat and Mouse Game
What’s going on in the markets is the equivalent of a toddler throwing a massive tantrum.
We’ve seen it play out many times before.
On December 16, 2015, the Fed raised interest rates by 0.25%. And it forecast four rate hikes for 2016.
But the markets freaked out at even the possibility that money would get more expensive. They were fixated on zero percent interest rates.
So the Fed stepped back. We got one rate hike – in December 2016.
And in 2018, when Jerome Powell said interest rate hikes were on “automatic pilot,” the S&P 500 plunged 20%.
The Fed swiftly softened its stance. It decreased rates three times in 2019.
Although the Fed may talk tough initially, it always caves to market pressure in the end.
I’m not saying it won’t keep raising rates in the short run. But in the long run, I don’t think it will do so as aggressively as the market fears.
Now, it’s painful and disorienting. I know.
This volatility around worrying about what the Fed does next is becoming a pattern.
But there’s nothing the Fed can do – by raising rates or selling assets – to impact real inflation anyway. The Fed can’t create food. It can’t create oil.
This year, it made a political decision aimed at taking pressure off itself for missing the inflation boat to begin with.
It wanted to say, “Look, we did get it.”
But the Fed knows that selling its assets too quickly would hurt the markets too much.
And raising rates too high would make servicing U.S. and other dollar-denominated debt too expensive. It could cause a recession.
Still, the markets are going to whipsaw every time someone from the Fed mentions “balance sheet runoffs” or interest rate hikes.
But I have already been through so much market turmoil in my career…
From the 1987 crash… to the dot-com crisis… to the financial crisis… to the first time the Fed stopped quantitative easing (QE) after the financial crisis… to the pandemic.
So I know that this market turbulence will pass. I also know that, until it does, we should absolutely take advantage of it…
Because as I saw during my 15 years on Wall Street… and my three decades in the markets… some of the best profit opportunities happen in crazy markets.
In fact, when I worked on Wall Street, big banks paid me millions of dollars to develop systems to profit from difficult markets like these.
And for the past two years, I’ve been developing a new strategy. We can use it to take advantage of The Great Distortion… no matter what action the Fed takes next… and whether the markets go up or down…
To show you how, I’m hosting an urgent investment briefing tonight at 8 p.m. ET.
To everyone who attends, I’ll even give away a free recommendation that could double your money.
So if you are at all worried about the direction of the markets, or what the Fed will do next, make sure you join me tonight.
Editor, Inside Wall Street with Nomi Prins
P.S. The Fed’s latest interest rate hike – 0.75% – was well signposted. So it’s safe to say the markets had already priced it in. But no doubt, we will see plenty more volatility around future rate announcements this year.
My new profit strategy is a way for you to play whatever market volatility comes as a result… to your advantage.
If you want to know more, click here to automatically save your spot at my urgent briefing tonight. Attendance is free… and I’ll even give away a recommendation – no strings attached – so you have a chance to start making money right away.
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