The 50 bps interest rate cut by the FED shook the markets initially. The immediate reaction was quite ambiguous as the investors could not decide if they should be scared of the growing risk of the recession or if the time to be greedy has been there.
The green crypto, stocks, and the precious metals clearly indicate that they see the current trend pretty bullish. Lots of people know the fact that when the interest rates start to go lower, the markets turn green but very few of them are aware of the reasons behind it.
There are billions of dollars put in the term deposit accounts for 5% interest per year. People who used to think that there was a nice return for their money with almost 0 risk. However, when the interest rate cuts start to happen, people will no longer be satisfied with their earnings.
Earlier, it was pretty simple: assuming that there is 2.5% inflation per year and you are getting a 5% return, then the net yield is 2.5% - 3.0% per year, which was enough for people who do not want to bear the risks in other markets. Also, there are investors who have been buying government debt securities from the highest interest rates because they are both have dividends, once or twice per year, and their own value increases as the rates go lower.
The FED seems to have achieved its aim with a soft landing.
However, some producers were bankrupt due to the high debt interest that they had to pay when they ran out of cash. To tame the growing inflation, there would not be any other methods to get to these levels.
Now that the U.S inflation is below 3% and the Japanese central bank has kept the interest rates stable which enables carry traders to flow some money to the emerging markets (developing countries' stock markets), then the world of economy does not see any high - potential risks to hit soon.
As we witness all time highs every day, we need to consider the fact that the markets might be feeling of euphoria of the good news coming from the macro economy. I have geared up and flown more stablecoins and fiat money into the risky market but it is still better to hold the horses until the end of the year.
My gold bag sings great revenue but the crypto and stock investments are away from the break even point. I may add some more silver and heavy bags of stocks if I can be more courageous about the eradication of the risk of recession.
What do you think about adding more assets to the portfolio?
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