When Will the Fed Stop?

It could be a ways off, but there might be some good news... SPECIAL OPPORTUNITIES [The Oxford Club Special Opportunities]( When Will the Fed Stop? Matt Benjamin, Senior Markets Expert, The Oxford Club [Matt Benajmin] When, oh when, will the Fed stop? That's the predominant question echoing across Wall Street and other financial capitals these days. It's no coincidence that last week, when Chairman Jerome Powell and his colleagues at the Federal Reserve implemented the biggest interest rate hike in nearly three decades, the S&P 500 fell 5.8% - its biggest drop since the COVID-19 crash of 2020. Stock prices are clearly in lockstep with the Fed's policy moves, and that doesn't look like it will change anytime soon. This is clearly a Fed-driven bear market (as many are). And the stock market probably won't find a bottom and start rebounding until the Fed turns dovish again. According to [recent research from Goldman Sachs]( Fed-driven bear markets typically hit bottom and start climbing again within three months of when the Fed stops tightening. If you look at where we are in this tightening cycle, that's not good news. Not good at all. Last week, the Fed raised the federal funds rate - the rate at which banks lend to each other, which influences all other interest rates - to between 1.5% and 1.75%. And according to [the Fed's own predictions]( it will hike rates this year to 3.4% and will continue to raise them to 3.8% in 2023. The [fed funds futures market]( which represents where traders think the Fed will set rates, predicts the fed funds rate will reach a range of 3.75% to 4% in February or March of next year. That's seven or eight months away... and it will feel like an eternity if the stock market continues to react to Fed rate hikes, of which there will be many more. The futures market predicts another 0.75% hike in July and additional half-point hikes at its meetings in September and November. So there's a lot more pain to be had, potentially. The Kind of Good News But there's also some potential good news here. Because as we all know, markets are forward-looking. When you buy a stock, you're betting on how it will perform in the future. Same with bonds. And for good or ill, it's the same with interest rates. Interest rate markets are now anticipating what the Fed will do in the future. That's why the 30-year fixed mortgage rate has more than doubled over the past 12 months, from 2.9% last June to over 6% today, the highest rate in 15 years. That's an increase of 3.1 percentage points in one year. The 15-year rate and the five-year adjustable rate have risen in the same way. This is illustrated in the chart below... [Mortgage Rates Are Soaring]( The average rate on a new car loan has risen to 5.1%, a full percentage point higher than last December. Loans for used cars hit 8.5%, a point higher than December. Similarly, student loan rates are up and credit card rates are rising rapidly. Simply put, the price of every type of consumer loan is rising in expectation that the Fed will continue to hike - relentlessly - until inflation falls from its current level of over 8% back to 4% or lower. Together, those higher rates will put a damper on consumer spending, which will begin to rein in inflation. And though we hate to see stock market losses, the fact that households have lost nearly $13 trillion this year due to falling stock prices means people will spend less. It's the so-called wealth effect in reverse: If people look at their portfolios and see they're significantly smaller than a year ago, they'll think twice about that next big purchase. You can sum up all these factors as "financial conditions" - or how hard or easy it is for households and businesses to access money and credit. Goldman Sachs tracks this with its Financial Conditions Index, which is up 200 basis points (or 2 percentage points) since the beginning of the year and 100 basis points this month alone. For context, that index hasn't increased that dramatically since the U.S. economy essentially shut down in February and March of 2020, when COVID-19 arrived. So in a way, the stock market and consumer lending rates are doing the Fed's job for it. That could mean that the Fed's rate hike cycle could end sooner than expected, the market could bottom sooner and stock prices could turn around in the not-too-distant future. That's the hope, at least. And if you're concerned about where the markets are going, you're certainly not the only one. That's why Bryan Bottarelli, Head Trade Tactician over in The War Room, has [a new training video detailing his strategy that works best during bear markets](. This strategy had a 97% win rate during the COVID-19 crash and a 115% total return during the first 12 days of the Russia-Ukraine war. In other words, Bryan's killing it. [It all comes down to timing the trades perfectly...]( Invest wisely, Matt SPONSORED [Buy and Hold Bloodbath]( [Wall St Bloodbath]( If you're like most investors... you're seeing red right now. Lucky for you... trading legend and former CBOE trader Bryan Bottarelli wants to help. During the COVID Crash... he showed members 246% total gains while the S&P was DOWN 20%. Now... his FREE CLASS will show how the "[Perfect Timing Pattern]( can turn BIG market volatility into even BIGGER gains. [Join This FREE Training Today]( [The Oxford Club] You are receiving this email because you subscribed to Oxford Club Special Opportunities. 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