After the sudden announcement of billions of dollars in new tariffs on American imports, markets prepared to go into a tailspin…
Then, this morning, there was big-banner news of a two-day rally on Wall Street.
What gives?
Essentially, investors (and everyone else) have started to ask the Federal Reserve Bank for an interest rate cut that would give the markets a temporary shot in the arm.
As Fed chair Jerome Powell has suggested that an interest rate cut might be forthcoming, that’s driven positivity in the markets.
However, for those who have closely paid attention to the Fed’s very long-term strategy of slowly raising interest rates, this might seem like a step backward…
Raising interest rates has been widely hailed as ‘tough medicine’ for an economy that’s improving — so by that logic, cutting interest rates kicks the can down the road and allows the American economy to slump back in its seat.
That leads to the question of whether it’s a shrewd investor move to bet on market gains from this much-hoped-for interest rate cut … or whether it’s really more like crying in a bucket.
Analysts who have spent a lot of time following the activity of the Fed’s game might aptly suggest that there are better ways to play the system — for example, finding stocks and financial products that are relatively immune to the dynamic swings of the U.S. market index.
If you believe that the world will eventually overhaul its entire energy system to meet the challenge of climate change, then you’re possibly investing in solar stocks, regardless of what the market is telling you today.
If you believe that cryptocurrency development is inevitable, then you might, for example, buy and hold cryptocurrencies like Bitcoin — there’s even a fancy term for that called “hodling,” based on somebody’s keyboard typo.
The point is that any gains from hopping on a market rally over a Federal Reserve interest rate cut could potentially be elusive.
What happens next is anyone’s guess…
Do you think the Fed will cut rates? Why? Share your comments below.
