as the fed ends its rate hike cycle, the market gets excited, the market being 6 months forward looking. now the market is ahead of itself pricing in rate cuts as early as Mar. the fed officials however are looking at end 2024.
$US2Y(US2Y.BOND)$ is the leading indicator of fed interest rates. it is very sensitive to the economic and inflation data.
we shall overlay us2y on three important charts: $FTSE 100(.UKX.UK)$ , $SPDR S&P 500 ETF Trust(SPY)$ and $Invesco QQQ Trust-ETF(QQQ)$ .
ukx is the leading indicator of spy. hence it is important to know the effects of us2y on ukx. as us2y goes above 1.5% the uk market starts to consolidate/stagnate for 2 years.
spy started crashing when fed interest rate reached 1% in 2021. it then started to rebound from the low on oct 2022, the last fed rate hike was in jul 2023.
qqq is very sensitive to fed interest rate as tech companies need liquidity to expand. it dropped about 34% from its all time high. in comparison, spy only dropped about 25% from its all time high. qqq crashed harder and only rebounded from its low in jan2023.
in conclusion, as long as inflation is downtrending, this will keep us2y trending down. as us2y trends down, ukx, spy and qqq will trend up in that order.
do apply automatic investment system where you add shares at each 10% drop or at support zones if you know technical analysis. this way you conserve your capital while the stock is strongly downtrending. do take profit at 10% intervals or at resistance zones if you know technical analysis. this way you have capital to buy the dip. only applies to stocks in an index or warren buffett would approve. bon courage.
merci beaucoup@koolgal for interesting reads
merci beaucoup@Asphen for sharing your insights
merci beaucoup@TigerStars for the award and reviewing our posts
merci beaucoup@TigerWire for the many interesting topics
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