This Sector Will Be the Big Winner of the FOMC
This is the last of eight FOMC meetings this year. And the past few Fed meetings haven’t seen a great response from the market…
But today’s is arguably one of the most important.
Why? Because quantitative easing is ending. That means interest rates are rising, sooner or later.
And if there’s one thing the market hates, it’s rising interest rates.
So it’s important to pay attention to what the Fed says today. We know quantitative easing ending, but we don’t know when.
Economists think that the Fed is going to finish tapering in March and start raising interest rates in June.
But there are a lot of balls still in the air when it comes to COVID, and I wouldn’t be surprised if Fed Chair Jerome Powell could try to leave some room open for slower easing and rate hikes, raising rates in September instead.
Either way, Powell’s words today are going to send a ripple through the market. And while most stocks hate rising rates, there’s one sector in particular that loves it.
I’m talking about banks.
When rates are higher, banks make more interest income. The deposit-loan spread widens, and banks are more likely to loan out dollars to their customers. Plus, they make more money off of the other short-term lending operations they engage in.
Bottom line? Rising rates are good for bank stocks. And rising rates are coming – so banks are a smart investment right now.
Here’s a list of some of my favorites…
Santa Claus Is Not Coming to Town
Look, everything’s down. Even bonds started melting down with the stock market into the close yesterday.
And I’m keeping a real close eye on the VIX futures curve.
Right now, the curve is in contango. That’s typically a good sign for the market. But what if, by the end of the day today, that curve starts to flatten?
Well, we could be looking at a big holiday sell-off. You can say goodbye to the Santa Claus rally – because jolly ‘ole St. Nick may not be coming to town.
My VIX light is yellow, meaning volatility could swing in either direction. So, how do you protect yourself?
Typically, investors run to traditional safe havens like gold…
Click To Enlarge| SPDR Gold Trust (NYSEARCA:GLD), Dec 2021
Click To Enlarge| iShares Silver Trust (NYSEARCA:SLV), Dec 2021
But those charts speak for themselves – the precious metals aren’t doing so hot right now.
It’s a little ironic, but the best way to protect yourself from rising volatility is with the VIX, or a weighted ETF like UVXY.
Volatility going up? Well, calls on the VIX or UVXY will profit.
In a market like this, where almost everything is melting down, VIX futures are just about the only good hedge you’re going to get.
And that’s what smart traders are doing into the end of the year.
24 Hours Until My Quad-Witching Training Session
Quad-witching day, coming up at the end of this week.
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Founder, Profit Takeover
2 responses to “Your Post-FOMC Trading Guide”
December 15 2021