They say a picture is worth a thousand words.
That’s because it tells a story.
Same is true for charts.
They speak to you.
Telling you when to buy, sell or get out of dodge.
This picture is no different.
It tells one heck of a story. And this story can make you even more money.
The great thing is that it doesn’t take a PHD to understand it.
Just a simple glance tells you all you need to know.
Take a look, see what you think, then I’ll explain it.
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Alright, some great stuff here, right?
It’s a simple chart, with only two items on it.
The line is the Fed Funds Effective Rate. Essentially, the bench market lending rate that is set by the Federal Reserve.
The shaded areas represent an official recession. You can see the short one created by the pandemic in 2020.
But you can also see what precedes every recession for the past 40 years… Rising interest rates.
Before every single recession, interest rates go through a rate hike cycle. A period where rates are heading higher and remain elevated.
And the response to every recession, just by looking at this chart, is always the same – lower interest rates.
The interest rate cycle we just experienced, and that hasn’t officially ended, is the steepest interest rate hike cycle recorded, rising off the lowest levels in history.
To say a recession is coming is practically a guarantee. Exactly when, we don’t know. But there’s only one way this ends. In a recession.
They are unavoidable, for starters. A recession will occur again. And it likely will drag stocks much lower when that happens.
That’s where this picture can make you money.
All About the Money
Just think about it, if you know a recession is imminent, what can you do today to prepare for it?
Freshen up that resume, continue to network, start building a list of investments you want to take advantage of when everything pulls back. Housing, businesses, real estate, stocks.
Stocks are what we focus on, but this picture goes well beyond that.
A recession, market crash, and lower interest rates are coming.
If you are borrowing money, use variable rates, then lock them in at lower rates when the rate cuts come.
And if you think stocks are cheap today, just wait.
It looks like they can get a whole lot cheaper in the months ahead.
And that’s not my opinion.
I’m just looking at a picture that I think is worth more than a thousand words.
Regards,
Chad Shoop, CMT
Editor, Bank It or Tank It ELITE