{"id":19999,"date":"2022-08-12T07:30:35","date_gmt":"2022-08-12T11:30:35","guid":{"rendered":"https:\/\/www.jeffclarktrader.com\/?p=19999"},"modified":"2022-08-12T07:30:35","modified_gmt":"2022-08-12T11:30:35","slug":"when-theres-a-fork-in-the-road-take-it","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/when-theres-a-fork-in-the-road-take-it\/","title":{"rendered":"When There\u2019s a Fork in the Road, Take It"},"content":{"rendered":"

Andrew’s Note:<\/strong> When the 2008 financial crisis hit, many people lost their jobs, savings, and retirement… it was a devastating crisis, the worst in modern history.<\/p>\n

Now a new crisis is here, and Jeff Clark says now’s your final chance to prepare. Because the devastation that happened in 2008 is approaching and it’ll happen faster than anyone expected.<\/p>\n

But for Jeff, this crisis is a once-in-a-lifetime opportunity… where you could potentially double your money every day for the next 42 days with 95.24% accuracy.<\/p>\n

Jeff will go over this special window in his presentation on Wednesday, August 17 at 8 p.m. ET to help you prepare and protect your money. This opportunity won’t be available for long so click right here to reserve your spot<\/a>.<\/p>\n

Now, read on below to know which market you should follow during times of uncertainty.<\/p>\n

\n

Stocks and bonds are telling the market two different stories.<\/p>\n

According to the stock market, we’re on the verge of a new bull market. In this scenario, inflation has peaked, and the Fed will start backing off on interest rates.<\/p>\n

If that’s true, then this idea should be validated by the bond market.<\/p>\n

After all, the recent momentum we’ve seen in stocks is all about interest rate expectations… namely that they’re heading down.<\/p>\n

But when you look at the bond market, not only is it not validating this idea – it’s actually saying the opposite…<\/p>\n

Price Reactions to Economic Data Say It All<\/h2>\n

This idea came to a fever pitch after yesterday’s Consumer Price Index (CPI) report showed that inflation had no change on a month-over-month basis. But it was still up 8.5% from this time last year.<\/p>\n

That’s “great” news and fed perfectly into the new narrative taking hold of stock investors’ imaginations (I described this narrative in my essay earlier this week<\/a>).<\/p>\n

It even gave the Biden administration a political weapon to declare…<\/p>\n

\n

Today we received news that our economy had zero percent inflation in the month of July.<\/p>\n<\/blockquote>\n

Surely, the bond market would agree. Except, take a look at this chart…<\/p>\n

\"Chart\"<\/div>\n

It shows the 2-year Treasury yield, which is sensitive to Fed Funds Rate expectations.<\/p>\n

There are two points on this chart worth noting…<\/p>\n

    \n
  1. \n

    The yield is up 40-basis points month-to-date.<\/p>\n<\/li>\n

  2. \n

    It shows the jobs report released last Friday is much<\/em> more important to the debate about the Fed than the CPI report yesterday.<\/p>\n<\/li>\n<\/ol>\n

    Friday’s jobs report came in very hot… more than double what analysts expected.<\/p>\n

    That’s a very inflationary <\/em>data point because more jobs mean more demand. Which then, lead to higher prices that run counter to what the Fed’s mission is… hence the price reaction.<\/p>\n

    On the other hand, yesterday’s CPI report had a different reaction. It showed cooler<\/em> inflation than anticipated.<\/p>\n

    Which we already knew would come in light as I described in my essay on July 15<\/a>. And commodities have been falling, which affects the CPI report with about a one-month lag.<\/p>\n

    So, where’s the surprise?<\/p>\n

    Well, although rates initially fell, they quickly retraced back up.<\/p>\n

    Now, the 2-year yield is trading back up to Friday’s highs. Which means the bond market is anticipating a more hawkish Fed, not less.<\/p>\n

    It also means the bond market doesn’t care about the CPI report. Or not nearly as much as the jobs report.<\/p>\n

    But the stock market couldn’t get more bullish, with the tech-heavy and interest rate-sensitive Nasdaq rising 2.85%.<\/p>\n\n\n\n
    \n

    Free Trading Resources<\/strong><\/p>\n

    Have you checked out Jeff’s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career \u2013 at zero cost to you. Just click here<\/a> to check it out.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

    Who Do We Believe?<\/h2>\n

    In fact, the Fed doves are pushing the idea that the Fed will cut<\/em> rates next March.<\/p>\n

    But according to the Fed Fund swap market, expectations went from a Fed Funds rate of 3.25% on August 1 to 3.6% now.<\/p>\n

    So do we believe the stock market or the bond market?<\/p>\n

    Well, who would you rather believe in matters as important as your money? A brash, emotionally-prone person or someone who’s objective, calm, cool, and collected?<\/p>\n

    The stock market is emotional, whereas the bond market operates from necessity.<\/p>\n

    Every large corporation has a treasury department, which buys and sells all sorts of interest rate related products to finance and hedge operations.<\/p>\n

    Banks are most active because they’re in the business of taking in deposits and lending them out. This is all interest-rate driven and they don’t do it to speculate – they do it out of necessity.<\/p>\n

    But let’s also look at the track record…<\/p>\n

    While stocks were making new highs last December (right before the crash), interest rates were already telling us a different story.<\/p>\n

    Fed hike expectations were already rising and as a result, tech stocks were already underperforming the S&P 500.<\/p>\n

    The market acting out of necessity proved right and the emotionally charged market proved wrong.<\/p>\n

    It’s the same thing happening now.<\/p>\n

    And like last time, I would advise following the “smart money” because the stock market is beginning to operate on false pretenses.<\/p>\n

    Regards,<\/p>\n

    Eric Shamilov
    Analyst, Market Minute<\/em><\/p>\n

    <\/p>\n

    Reader Mailbag<\/strong><\/h2>\n

    When your money is on the line, who do you look to for guidance on your next moves?<\/p>\n

    Let us know your thoughts – and any questions you have – at feedback@jeffclarktrader.com<\/a>.<\/p>\n

    <\/p>\n","protected":false},"excerpt":{"rendered":"

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