Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
Stock Market Bull Trap? January 22 Top Likely - 19th Jan 19
After the Crash, the Stock Market Made a V-shaped Recovery. What’s Next - 19th Jan 19
David Morgan: Expect Stagflation and Silver Outperformance in 2019 - 19th Jan 19
Why Brampton Manor Academy State School 41 Oxbridge Offers is Nothing to Celebrate! - 19th Jan 19
REMAIN Parliament Prepares to Subvert BrExit with Peoples Vote FIXED 2nd EU Referendum - 19th Jan 19
Gold Surges on Stock Selloff - 18th Jan 19
Crude Oil Price Will Find Strong Resistance Between $52~55 - 18th Jan 19
Stock Market’s Medium Term is No Longer Bullish. It is Now Mixed - 18th Jan 19
SPX and Gold; Pivotal Points at Hand - 18th Jan 19
Fable Media Launches New GoWin Online Casino Affiliate Site in UK - 18th Jan 19
The End of Apple! - 18th Jan 19
Debt, Division, Dysfunction, and the March to National Bankruptcy - 18th Jan 19
Creating the Best Office Space - 18th Jan 19
S&P 500 at Resistance Level, Downward Correction Ahead? - 17th Jan 19
Mauldin: My 2019 Economic Outlook - 17th Jan 19
Macro Could Weaken After US Government Shutdown. What This Means for Stocks - 17th Jan 19
US Stock Market Indexes Reaches Fibonacci Target Zone – Where to Next? - 17th Jan 19
How 2018 Was For The UK Casino Industry - 17th Jan 19
Gold Price – US$700 Or US$7000? - 16th Jan 19
Commodities Are the Right Story for 2019 - 16th Jan 19
Bitcoin Price Wavers - 15th Jan 19
History Shows That “Disruptor Stocks” Will Make You the Most Money in a Bear Market - 15th Jan 19
What Will the Stock Market Do Around Earnings Season - 15th Jan 19
2018-2019 Pop Goes The Debt Bubble - 15th Jan 19
Are Global Stock Markets About To Rally 10 Percent? - 15th Jan 19
Here's something to make you money in 2019 - 15th Jan 19
Theresa May to Lose by Over 200 Votes as Remain MP's Plot Subverting Brexit - 15th Jan 19
Europe is Burning - 14th Jan 19
S&P 500 Bounces Off 2,600, Downward Reversal? - 14th Jan 19
Gold A Rally or a Bull Market? - 14th Jan 19
Gold Stocks, Dollar and Oil Cycle Moves to Profit from in 2019 - 14th Jan 19
How To Profit From The Death Of Las Vegas - 14th Jan 19
Real Reason for Land Rover Crisis is Poor Quality of Build - 14th Jan 19
Stock Market Looking Toppy! - 13th Jan 19
Liquidity, Money Supply, and Insolvency - 13th Jan 19
Top Ten Trends Lead to Gold Price - 13th Jan 19
Silver: A Long Term Perspective - 13th Jan 19
Trump's Impeachment? Watch the Stock Market - 12th Jan 19
Big Silver Move Foreshadowed as Industrial Panic Looms - 12th Jan 19
Gold GDXJ Upside Bests GDX - 12th Jan 19
Devastating Investment Losses Are Coming: What Is Your Advisor Doing About It? - 12th Jan 19
Things to do Before Choosing the Right Credit Card - 12th Jan 19
Japanese Yen Outlook In 2019 - 11th Jan 19
Yield curve suggests that US Recession is near: Trading Setups - 11th Jan 19
How Unrealistic Return Assumptions Are Ruining Your Stocks Portfolio - 10th Jan 19
What’s Next for the US Dollar, Gold, Stocks & Bonds? - 10th Jan 19
America's New Africa Strategy - 10th Jan 19
Gold Mine Production by Country - 10th Jan 19
Gold, Stocks and the Flattening Yield Curve - 10th Jan 19
Silver Price Trend Forecast Target for 2019 - 10th Jan 19

Market Oracle FREE Newsletter

Bitcoin Analysis and Trend Forecast 2019

If You're Worried About Rising Interest Rates, Look at This Chart

Interest-Rates / US Interest Rates Aug 04, 2013 - 12:34 PM GMT

By: DailyWealth

Interest-Rates

David Eifrig writes: "Don't fight the Fed."

You can hear that phrase on bond-trading desks throughout Wall Street. It's a warning to investors and traders. Don't try to outthink the central bank or anticipate its next moves...


Federal Reserve policies and their effects on the economy are like the movement of a giant aircraft carrier. It takes a long time for the direction and momentum to shift. The ships don't swerve suddenly.

The Fed is the same way. The influence of its monetary policies is pervasive and relentless. If the central bank is cutting rates and trying to juice the markets to keep the economy moving along... you'd better not bet against fixed-income and stock markets.

In my experience, working on the desks of a few Wall Street firms, trying to go against the Fed is a bad trade... You'll lose almost every time.

But... you may ask... what happens when the Fed does begin to shift? We don't want to be caught on the wrong side of any new policy, right?

It turns out, you don't need to lose sleep about that, either. Let me explain...

As readers of my Retirement Millionaire service know, I always base my decisions on the facts. I don't risk my money on speculations or hypotheses. I look deep into what the data tell me is really happening in the market. We make our decisions based on evidence.

So today, we're going to look at the facts surrounding how markets react to Federal Reserve market policy. I assure you the data tell a different story from the one you're likely to hear about "taper risk" and the imminent demise of the "bond bubble."

Let's look at the facts. What would likely happen if the Fed comes out tomorrow and announces, "Great news, the economy is booming and we're raising rates and ending all of our stimulus!" Would that be our signal to run to cash?

Not at all. And here's why...

When an announcement is made that rates are rising – whether it's ahead of the Fed's actual actions or an advance warning – stock indexes like the Dow Jones Industrial Average will take a tumble for a few days, maybe a week. But believe me... they'll come roaring back.

This chart shows stocks for 40 years, essentially my investing lifetime. The shaded areas are the time when the Fed was raising its federal-funds rates. That's the rate it sets for banks to lend each other money. The average gain when the Fed was raising rates was 14%.


That's not a trade I'd want to miss.

But be thankful that most people don't know that. It makes it easier to benefit from misguided or overblown fears in the stock market. This is why I recommend people stay invested in stocks in their portfolio's asset allocations.

In fact, the U.S. economy continues to grind higher. I don't see evidence that the Fed will declare victory and cut off its bond-buying as soon as some people think. And even if it did, you'd have time to adjust your portfolio before the true effects filtered through the economy... Again, the Federal Reserve's ship does not turn on a dime.

That means a portfolio of well-chosen stocks will continue to perform well. And it means investors should not unload their unleveraged fixed-income positions, either. With a slow-growing economy and minimal price inflation, real returns on almost all securities still look attractive.

My core holdings always include businesses that are shareholder-friendly and that will make money in almost any economic environment. If I can buy sales and cash flow at cheap levels, I want to do that trade over and over...

No matter what the Fed is doing.

Here's to our health, wealth, and a great retirement,

Dr. David Eifrig

.S. If you want to build a safe, secure, income-producing portfolio – that can profit in any interest-rate environment – I encourage you to check out Retirement Millionaire. Right now, it costs just $39 for a year's subscription. We keep the costs low to make sure we can get useful, fact-based investment insight into as many folks' hands as possible. And if you don't like it after four months, you can get all your money back. Learn more here (without watching a long promotional video).

http://www.dailywealth.com

The DailyWealth Investment Philosophy: In a nutshell, my investment philosophy is this: Buy things of extraordinary value at a time when nobody else wants them. Then sell when people are willing to pay any price. You see, at DailyWealth, we believe most investors take way too much risk. Our mission is to show you how to avoid risky investments, and how to avoid what the average investor is doing. I believe that you can make a lot of money – and do it safely – by simply doing the opposite of what is most popular.

Customer Service: 1-888-261-2693 – Copyright 2013 Stansberry & Associates Investment Research. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This e-letter may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the express written permission of Stansberry & Associates Investment Research, LLC. 1217 Saint Paul Street, Baltimore MD 21202

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Daily Wealth Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules