Weekly Wrap: Tap into the Fed’s Power!

Hey There Income Hunters,


Equities were on a wild ride this week thanks to Jerome Powell once again showing zero concern for rising bond yields.


You see, the Fed is working closer than ever with the Treasury now that past Fed honcho Janet Yellen is there.


Janet has shifted the Fed to a more accommodative stance than in the past — and they are hell bent on getting inflation.


Now, investors are fearing that rise because of its damaging effects on returns. (Keep in mind, real returns are investment returns minus the rate of inflation.)


However, worries about out-of-control inflation haven’t been realized in 40-years and interest rates historically plummet once initial inflation subsides.


As you can see in this chart below, the US 10-year yield remains solidly in the 40-year down trend, and it would take the Fed hiking rates to change that …



Well, the Fed has explicitly said they will not be raising rates until 2023 at the earliest …


Plus, foreign rates are either negative or extremely low, so foreign demand will begin to shift into the US to capitalize on the increase in returns.


Trade the Fed …


You’ll often hear me say you have to “trade the fed.”


What does that mean?


It’s simply using the agency’s massive headwinds of money flow to gain an advantage.


The Fed is the majority buyer for US Treasury Bonds and the US Government has super-charged spending — injecting more than $5 trillion into the economy over the past two years … with more to come.



In Power Income, I keep you clued in to every move the Fed makes and give you the inside scoop on how their decisions and flows will impact specific sectors of the market …


Stimulus Highs


Here is an update on the Power Income Stimulus Index (table below). And you guessed it … another all-time high this month!


You need to read between the lines with the Fed. Powell reiterated this week that the Fed is continuing QE with “at least” $80 billion in Treasury purchases and $40 billon in mortgage buys each month.


The increase you see below (110-plus billion) is just for the past week. So far in March they have purchased over $153 billion in total — and there is a week and half left…



These moves behind the scenes will keep interest rates from rising to levels that jeopardize the 2021 growth and inflation picture…


The Power Income Reflation Indicator is showing all green once again, and I don’t see that changing for at least 3-6 months…



#IncomeHunters should continue to focus on commodities, energy, precious metals and consumer discretionary names …


And be sure to follow the Power Income daily letter to view my portfolio and gain access to analysis of new ideas every week …


Have a great weekend and as always …


Live and Trade With Passion My Friends,



Griff

 

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