Markets will often tell the truth, or even predict the future more accurately than any talking head politician or media stooge. That’s why when markets make moves I try to pay attention and figure out what they might be saying. Markets aren’t always right either and “Mr Market” is a common allegory used to describe the more irrational personality traits of markets, but still – I’d rather listen to Mr Market than some Elected President or Mainstream News Anchor….so what is Mr Market saying today?
In a nutshell, Mr Market thinks that the Fed Pivot is here. The Fed Pivot is that point where the Federal Reserve of the US (The most powerful Central Bank in the world) changes it’s bias from Raising Interest Rates to Lowering them and often the rest of the world (especially my country Australia) tends to follow its lead. The Fed Pivot has been talked about for years now in the context of the fight against Inflation and it’s kind of a landmark point in the Economic cycle.
I say that Mr Market thinks this way because after the recent October Consumer Price Inflation Report came out it showed Inflation dropping to it’s lowest point in 2 years and the Fed Swaps Market almost immediately started pricing in a 50 basis point Interest Rate Cut for the July 2024 FOMC Meeting. If Mr Market is right that means there are going to be no more interest rate hikes and the next move will be an interest rate cut in maybe about 8 months time.
Why does anyone care? Well, everyone SHOULD care. If you have a Mortgage or are feeling the Cost of Living Expenses hurt because of Inflation then a Fed Pivot should be the signal that things aren’t going to get worse. I also care because it may have a significant impact on the Spot Prices for Gold and Silver. Gold is near record highs and it might cool off a bit if Inflation really is under control and it looks likely that financial calamity has been avoided. Therefore a Fed Pivot without a crisis is probably bearish for Gold in particular. Silver, with it’s industrial applications, might be a better option for stackers like me if the “Soft Landing” scenario for the economy might actually be possible.
DISCLAIMER - This is not financial advice
