🤔 Interest Rate Projections: What Now?

What’s on the Menu 🍴

As we head for the finish line of 2023, today we’re reflecting on some investing wisdom, thoughts for the future, and things to watch out for this week.

We’ve got a full plate, so let’s jump right into it!

• What To Watch This Week 👀

• 3 Rules For Surviving (And Thriving) In Crypto 💰

• The Fed’s Interest Rate Projections: What Now? 📈

• The Truth About Bitcoin: Is It a Scam or the Future? 📺

Today’s newsletter is a 5 minute read.

What To Watch This Week 👀

We got a face ripping rally in stocks and bonds last week after inflation data cooled again and the Federal Reserve hinted at their openness to cutting interest rates in 2024.

Small caps rocketed, with the Russell 2000 index up more than 5% last week. Even long term bonds and solar stocks, which have been major laggards this year, joined the rally.

Even 30-year bonds and solar stocks, which have been major laggards this year, joined the rally!

This week promises to be quieter as we approach the Christmas holidays.

We will get a rate decision from the Bank of Japan and a small number of earnings reports from companies such as Nike, FedEx, Micron, Carnival Cruises, and CarMax.

We’ll also get a few notable economic data releases:

• UK inflation (Wed)

• Japan inflation (Thurs)

• UK retail sales (Fri)

• US Personal Income & Spending (Fri)

• US Durable Goods orders (Fri)

We’ll be keeping close watch on the following assets & sectors this week:

📈 Rising

• Solar (TAN)

• Small Caps (IWM)

• Crypto Altcoins

• Biotech (XBI)

• Real Estate (XLRE) & Homebuilders (XHB)

📉 Falling

• Stocks with “tax loss” selling pressure

• Energy stocks (XLE / XOP)

3 Rules For Surviving
(And Thriving) In Crypto 💰

Cryptocurrency: the modern-day gold rush where the bold reap rewards.

In 2023, Bitcoin alone has soared a staggering 150%+, leaving NASDAQ's 50% in its digital dust.

Yet, despite the glittering potential, many miss the mark.

Success in the cryptoverse isn't just a game of chance; it's an art.

Here are three must-know strategies for thriving in this digital Wild West.

1. Follow the Story, Not Just the Coin

In crypto, it's the tale, not just the tech, that reigns supreme.

Narratives drive capital flow. You could unearth a gem of a crypto project with solid fundamentals, but if it's not the talk of the town, it might just gather digital dust.

Meanwhile, projects riding the hype train, even if they're all sizzle and no steak, often see meteoric rises.

Stay sharp: we're scouting the horizon for the hottest crypto narratives of 2024.

2. Pulse-Check the Market Mood

Want to know what's really cooking in crypto?

Get a feel for the market's heartbeat. Tools like the Fear & Greed index offer a peek into the collective psyche of the crypto world.

But the juiciest insights? They're often hiding in plain sight in Twitter rants and Discord chats.

And let's not forget the good old legacy media. When CNBC starts whispering sweet nothings about Bitcoin hitting $200,000, it might just be your cue to cash in those chips.

3. Steer Clear of Yesterday's Heroes

Here's a hard truth: crypto is a realm of constant rebirth.

New stars often eclipse the old guard.

Data doesn't lie: fresh projects making their grand entrance just before a bull run often outshine the seasoned players.

Take Litecoin and Kaspa, two peas in a proof-of-work pod.

Kaspa's stunning 2,100% leap this year puts Litecoin's modest 3% to shame.

The lesson? Avoid clinging to past glories.

In the world of crypto, today's new underdog could be tomorrow's unicorn.

The Fed’s Interest Rate Projections:
What Now? 📈

A lot of people are feeling very excited after the latest Federal Reserve Meeting.

These meetings give us insight into if interest rates are rising or falling and we also occasionally get future rate projections from the Board.

This past meeting we learned that interest rates are not changing (as expected), but we also got the infamous “dot plot” update.

The dot plot gives us insights into what the FOMC participants expect interest rates and other economic indicators to do in the near future.

We’re seeing a lot of excitement after this meeting and real estate investors are putting out content explaining that we’re going to see 6 rate cuts in 2024.

The Fed didn’t actually say that they expect 6 rate drops next year, by the way!

They put out “rate projections”, but it’s the futures market that is “pricing in” the expected rate drops (i.e. investors are predicting how many rate cuts we will get).

We’re also seeing hilarious memes & videos of people making fun of how much demand there will be in the housing market as rates drop.

Things are getting euphoric before rates even drop!

This Instagram reel depicted a chaotic black Friday sale where people are rushing to buy houses instead of TVs:

Will home buyers be pleasantly surprised by rates dropping in 2024? Or will the Fed disappoint by being too slow to lower rates?

Let’s look at the recent history of the Fed’s projections for 2024.

In December 2022, the range of the target rate was VERY wide. The Fed themselves didn’t exactly know what to make of the data.

It was tough to pin down what inflation and the economy were going to do.

Fed members expected the target rate to range from 3% to 5.5%.

Then we can see in the most recent plot here in December 2023, the projections for 2024 have become much tighter:

It’s clear to see how “off” many participants were in December 2022.

The Fed is data dependent but their projections should be a guide, not a guarantee.

They’re good at projecting things right around the corner, but they’re far less accurate the further out in time we look.

A lot of things still need to go right in 2024, and the Fed knows this.

Jerome Powell himself said:

The high in rates is likely in, but how quick or slow the Fed will be to actually lower rates is still a big question mark that’s very dependent on the labor market & consumer spending.

The Truth About Bitcoin:
Is It a Scam or the Future? 📺

Many people have been wondering if they should be investing in Bitcoin or not.

With all of the opinions out there on it being "a scam" or "a bubble", it's no wonder investors are scratching their heads as price keeps climbing back from the depths.

In today’s video, Nikki gives her opinion, from the perspective of a Financial Planner, on how to approach the decision on investing in cryptocurrencies like Bitcoin.

Food For Thought 🧠

"You must create your own world or you will die from inaction."
- Robert Greene

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.