Vlad’s Fed Alert: Trading the FOMC Decision

September 12, 2019
By Vlad Karpel

RoboStreet – September 12, 2019 

The Fed Rate Trade Is Back On 

The Federal Reserve is set to meet again next Wednesday, September 18, and layout the latest fiscal policy for all to see. There is an almost unanimous consensus the Fed will cut the Fed Funds Rate by a quarter-point from 2.25% to 2.00% at the meeting as the governing body doesn’t want to take any chances that the economy will lose steam as has been the case for most developed global economies. 

Fed Chairman Jerome Powell is quoted as saying “we will do whatever it takes to sustain the economic expansion” – and that would mean cutting rates to steepen the yield curve, reduce the fear of recession and bring down borrowing costs for both businesses and consumers. Even after yesterday’s stronger than expected inflation reading of Core CPI coming in at 0.3%, the Fed is set to take dovish action and not kick the legs out from under the bond and stock markets if they left rates unchanged. 

 “I’m investing my own money in each and every stock as my AI platform identifies.”

And remember we’re not talking about day-trading here.  I’m looking for 50-100% gains inside of the next 3 months, so my weekly updates are timely enough for you to act.

Click Here – To See Where I Put My RoboInvestor Money

And the Fed isn’t the only central bank making waves this month. Just yesterday the European Central Bank, or ECB, launched fresh initiatives to address the lagging economy in the Eurozone within their policy decision. That central bank will lower the deposit rate to -0.5% as expected and restart their QE bond-buying program in November with monthly purchases of $20 billion euros worth of bonds. 

Prior periods where the ECB utilized quantitative easing showed some mild improvement in economic growth, but from the chart below it seems the law of diminishing returns is acting as a headwind. Europe’s aging population is living longer and pension and public safety net programs are under heavy financial stress with the Eurozone showing signs of slowing in the fourth quarter. 

As of late last week, and all through this week, the major averages have traded higher, fueled by both the renewed dialogue regarding trade talks with China to be held sometime in October and the catalyst of lower interest rates that impact borrowing at all levels of the economy. And while the latest round of stimulus might provide a short-term sugar high for European stock markets, structural problems remain with the potential for a hard Brexit from the EU in late October. 

Regardless though of the longer-term ramifications of ECB fiscal policy, European equity markets will likely hang in there knowing the ECB continues t have its back. But it also means, the Euro could, currently trading at 1.05 to the dollar could easily trade at parity with the greenback possibly by year-end and matching the low of the past twelve years. 

While a cheaper currency can be positive for exports, it also drives up the cost of imports, and Europe imports lots of everything. The Eurozone countries combined are the biggest export market for the U.S. – accounting for about $318 billion in trade in 2018. So, the forces of a restart of QE and deflationary pressures are depressing the euro, which is a warning flag about a nation or region’s economic well-being. 

Even as fiscal policy gets spelled out in certain fashion, the stock market has exhibited anything but stability following moves by the Fed and ECB. The last time the Fed lowered rates in July, the equity markets initially rallied and then sold off. Here we are again about a week away from the Fed decision and stocks are again rallying on a perceived lowering of short-term interest rates and a breakthrough in the trade war. As we head into the weekend, the S&P has rallied 165 points or 5.8% within the past two weeks, from 2,850 to 3,015 – and is now technically overbought. 

It’s my view the market will not break out until the trade situation is made crystal clear as to its terms and the third-quarter earnings season commences in the front end of October. Short-term bullish sentiment will likely “sell the news” when the Fed cuts rates and provides what will likely be a neutral policy statement. From there, the market and investors will have to wait a full month before earnings season gets underway, leaving the investing landscape vulnerable to a retest of the support for the S&P at 2,850. 

Fortunately for those subscribing to my RoboInvestor advisory service, we can make money within this wide 6% trading range, utilizing the right stocks and ETFs to profit from. RoboInvestor is a hands-on portfolio that I personally invest in every recommendation using my proprietary AI tools to execute the right entry and exit points for each and every trade. 

I manage a portfolio that ranges from 10-20 positions with an emphasis on owning only blue-chip holdings that are diversified and technically very strong per my AI indicators. A quick view of my Tradespoon Seasonal Chart for the Invesco QQQ Trust ETF (QQQ) that holds many of the market’s leaders like Microsoft, Apple and Amazon.com shows a high probability of the Nasdaq trading lower over the next month.  

Just as the financial media is getting the investing population excited about trade and a rate cut, my indicators are saying much of the excitement is already priced in. Rather than pay up for big-cap tech stocks that have enjoyed a solid rally off of recent lows, I’m finding much better valuations in financials, consumer staples, and utilities that zig when the rest of FAANG and hot growth stocks zag. The market is going through fierce sector rotation that has left many a hot cloud computing, cybersecurity, big data, 5G, digital media, e-commerce, and SaaS in a heap of technical damage. 

Our RoboInvestor Portfolio owned none of these former high-flyers heading into the current trap door sell-off for most all these stocks. And if you want to know how to trade the Fed decision and which stocks and ETFs to have in your portfolio heading into the end of the quarter, then sign up today and become a member of RoboInvestor where the power of an unemotional and always thinking AI platform is guiding you through the noise and consistently producing a stream of profits 87.6% of the time you put your money to work in my recommendations. 

Become a RoboInvestor today and dramatically raise your level of confidence in how your money works for you in a market where being wrong can be very expensive. 

 “I’m investing my own money in each and every stock as my AI platform identifies.”

And remember we’re not talking about day-trading here.  I’m looking for 50-100% gains inside of the next 3 months, so my weekly updates are timely enough for you to act.

Click Here – To See Where I Put My RoboInvestor Money

*Please note: RoboStreet is part of your free subscription service. It is not included in any paid Tradespoon subscription service. Vlad Karpel only trades his own personal money in paid subscription services.  If you are a paid subscriber, please review your Premium Member Picks, ActiveTrader, MonthlyTrader, or RoboInvestor recommendations. If you are interested in receiving Vlad’s personal picks, please click here.

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