The Top 10 Reasons The Market Might Sell Off With The Fed Cutting Cycle
Here's some of the fundamental reasons the stock market might decline while the Fed is cutting interest rates, and how we can play it.
Reminder, we'll have chat tomorrow, August 28 at 3:00pm ET in the Discord channel or you can email your questions to support@tradingwithcody.com.
Also, a quick programming note. We will be traveling for meetings and business stuff to Abu Dhabi, Dubai, and Hong Kong from September 5th through the 17th. We will be writing and publishing for Trading With Cody while we're gone, and we'll even try to do a Live Q&A Chat or two if we can make it work from those time zones that are almost on the other side of the planet.
On to today's analysis, I want to be clear at the outset here that we are not saying the markets are going to crash here or that the markets are for sure putting in a temporary top here. We are just saying we think there are reasons to be cautious and we wanted to put them all down together. We are sticking with our longs and we are as excited as ever about The AI Revolution, The Robotics Revolution and our approach to long-term investing.
That said, we published Our Fed Playbook: Fight The Fed on July 30th, and in that article we highlighted the fact that it's usually better to be bullish when the Fed is tightening, and cautious or bearish when the Fed starts easing. Now that it is all but certain that the Fed will be starting a cutting cycle at the September meeting, we thought it would be appropriate to send a follow-up article giving a few reasons why the markets will likely sell off in this cutting cycle (we also identify a few of our hedges below).
After all, our view has always been that the economics drive the Fed, not the other way around. The Fed is almost always late to the game and its policy decisions usually do nothing more than exacerbate the booms and busts.
