✋ Is This The End of the Rate Hike Cycle?
What’s on the Menu 🍴
We’ve seen rates explode at the fastest pace in recent history…
But it looks like we could be topping out.
Is the Fed finally done raising rates?
We’re also looking at some BIG crypto and stock moves this week!
Is This The End of the Rate Hike Cycle? ✋
Is Altcoin Season Back? 📅
Max Pessimism Is Leading To BIG Stock Moves 📈
My Net Worth Isn’t Growing. What Can I Do? 📺
Today’s newsletter is a 5 minute read.
Is This The End of the Rate Hike Cycle? ✋
This week the Federal Reserve and Bank of England held interest rates at their current levels for the second straight meeting, and last week the ECB held their rates steady as well.
It’s a strong sign that central banks are at the end of one of the fastest rate hiking cycles in history.
Central bankers are still acting as if the inflation dragon hasn’t been slayed, but they’re also now recognizing the risks that high rates pose to the economy.
Interest rate futures are signaling that the Federal Reserve is indeed done with rate hikes this cycle, pricing only a 27% max chance of another rate hike through 2024:
In fact, probabilities of an interest rate CUT are as high as 42% by May and 63% by June of next year.
Many investors & citizens are still concerned about the current levels of inflation, and there’s a lot of worry that inflation could accelerate again.
However, the data is indicating a different reality; we’re headed for lower inflation readings in the months ahead and economic weakness could become the chief worry.
The Cleveland branch of the Federal Reserve is projecting a 3.28% inflation rate for the month of October, a decline from the 3.7% readings in both August and September.
Their projection also went down from 3.49% a month ago to the 3.28% level now. We’ll know the official October number when it’s released on November 14th.
One component that is helping bring down in inflation in the short term? Gas prices:
Wholesale gasoline prices dropped from $2.55 to $2.20 per gallon in October.
Looking further ahead, the flattening of home prices in 2022 and 2023 will begin putting downward pressure on inflation data in 2024 because of the lag of housing measures within CPI.
So while some categories could increase in 2024, there’s still a very good chance that overall CPI will be below the 3% level by spring.
How will the Fed react?
If short term interest rates remain above 5%, the “real interest rate” would balloon, benefitting savers but pressuring business spending & investment.
Consumers currently face 8%+ mortgage rates and even higher rates on credit cards and personal loans.
Those with lower savings levels are already struggling according to commentary from several banks this earnings season.
The key to an economic soft landing in 2024 could very well come down to how willing the Fed is to lower rates in response to lower inflation.
We’ve been on record saying that central banks have been persistently behind the curve on appropriate monetary policy for more than two years.
But the Federal Reserve did show slight signs of flexibility this week, enough to spark an optimistic rally in stock and bond markets.
One thing seems certain: we are entering the next phase of the macroeconomic cycle.
Investors should keep an open mind and be willing to adapt their forecasts.
The playbooks that work in 2024 will likely be quite different than those in 2023!
Is Altcoin Season Back? 📅
Altcoin season, that period of time when crypto prices go nuts…
And your 12 year old nephew is flexing his NFT gains.
After a brutal past two years for altcoins, it seems like we’re seeing signs of life.
Non-Bitcoin Crypto Price Charts Waking Up:
A couple weeks ago, we pointed out the possibility for crypto prices to break above their 200 period moving average.
Not only did this chart break resistance, but it’s up about 20% since September!
It’s currently taking a pause at $380 billion, but increasing volume seems to show an increase risk appetite from investors.
Crypto exchange earnings
Coinbase outperformed Q3 analyst earnings and revenue projections, reporting a loss of $0.01 per share and total revenue of $674.1 million.
But the crypto exchange's Q3 trading volume was $76 billion, not meeting the anticipated $80.1 billion and declining from the prior quarter's $92 billion.
Transaction revenue decreased by 12% from the preceding quarter, with Coinbase attributing the drop to diminished crypto market activity and volatility.
Coinbase is currently bouncing off support, and is up 139% YTD!
Headwinds Still Ahead
The SEC is investigating PayPal's stablecoin, PYUSD.
This SEC action is another in a sequence of regulatory moves against crypto, following their suit against the Binance-brand BUSD stablecoin.
Questions arise surrounding the nature of stablecoins and whether they can be classified as securities.
So while there are still some headwinds like the SEC suing any project within arm’s reach of the crypto space, one thing is for sure:
People are still working to innovate and build the next big crypto project.
Max Pessimism Is Leading
To BIG Stock Move 📈
Expectations have been low for many publicly traded companies.
A quick scan of the S&P Total Market index shows almost a quarter of all stocks are down -30% or more year-to-date.
It’s been a rough year for many names that were market darlings in 2021 who could do no wrong in the eyes of investors.
Here are a few examples of some eye popping moves this week from earnings announcements:
With a total price move over 30%, obviously max pessimism was priced into the stock.
It seems active accounts, streaming hours and revenue trends continue to be positive.
Also, management seems to be focused on driving positive free cash flow.
After investors lost confidence in PINS ability to survive the social media landscape, it appears the new CEO from Google is proving himself.
PINS is seeing healthy revenue growth compared to a name like SNAP, and user growth trends are challenging nay-sayers (especially in the U.S. and Canada where trends have turned positive).
Management pointed out that they’re capturing Gen Z onto their platform, which is a very important component of their future growth.
Doordash, famous for food delivery, seems to be finding no trouble getting customers to stick around.
Revenue was up this past quarter a whopping +29.4% y/y.
They’re seeing healthy customer order growth (+24% y/y) and management even mentioned that they show up to “many consumers' doors many times a week”.
Looks like food and grocery delivery is becoming a “must have” for consumers even in the face of a “slowing economy”.
These are just a few of the names that have had large gains this week.
Others include LMND (Lemonade), PBI (Pitney Bowes), PTON (Peloton), SHOP (Shopify), and more!
Maybe investor pessimism on many stocks was too harsh and this could be the start of a turnaround.
Either way, we still think we’re in a very big stock pickers market, proven by a lot of these moves.
📺 Video of the Day -
“My Net Worth Isn’t Growing. What Can I Do?”
Stocks and crypto are still below their all-time highs from two years ago…
And the net worth of many investors has stagnated.
So, what can we do to help our wealth grow even in a slow economy?
We answer that and many more questions in this week’s We Talk Money!
You’ll also learn:
The Fed Paused…What Happens Next?
Why are altcoins popping?
Tips for teaching your kids money skills
And much more!
Delicious Bites 😋
Food For Thought 🧠
"Money is a terrible master but an excellent servant.”
- P.T. Barnum
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DISCLAIMER: We are not investment advisors, and this content is for educational purposes only. We don’t offer financial, legal, or tax advice. Nothing we say is a recommendation to buy or sell any assets. Trading and investing are extremely risky, so please be careful and do your own research.