? What the Fed Rate Cut Means & How to Play It (w/Tony Greer) | Stock Trade Ideas

Welcome to trade ideas I’m Jake Merle sitting down with Tony Greer Editor of the morning navigator Tony great to have you back on the show for having me man So we just saw the first rate cut in over a decade Powell. Just got done giving a speech and Personally, this is the first rate cut. I’ve seen. Yeah, I know I’m a student of the markets Just getting into the markets and I want to get your thoughts. Is this a good thing a bad thing? What’s going on? Yeah We should I guess we should set it up with some history since you’re student of the market right last time the Fed cut rates We were addressing The housing crisis, right? So we started off with Fed Funds at five and a quarter and wound up lowering that them to zero Over the course of I think just over a year and during that time the market got shellacked Right because the stock market was then can falling into the mortgage crisis. We were dealing with Excuse me. We’re dealing with Bear Stearns. We were dealing with Lehman Brothers going bankrupt the whole thing We had a much different economic background as well. You know, we had higher oil prices. We had oil prices up in 95 So we had higher interest rates at around four percent in the ten year. So things were much different, right? We were we were addressing then what was coming out of a crisis right now. We’re not coming out of any crisis, right? What seems It seems like a sort of smartly prudent rate cut to me believe it or not And this is a little bit of a change of opinion for me, right? I originally thought that Powell was 100% beholden to Trump for this rate cut, right? I mean he literally seemed optically like he was just Caving to the president pointing around the world saying being a complete baby the way he knows to be everybody else gets lower rates Why we have such high interest rates President Obama got zero interest rates for his whole ten-year Why do I have to have 3% interest rates, you know? So he conflates these stories out of nothing and starts putting pressure on the Fed Chairman and that’s when you know We saw even more of a dovish pivot but we saw that goal the dovish pivot go around the world and it was really in a reaction to a collapse in the Manufacturing sector, which was really evident like you can see them right go right around the world for Europe to China, you know We saw PMI stick down from either the mid 50s to high 50s To the low 50s and then some into the 40s now as you know that you know p.m Eyes, we judge economic expansion and contraction as being either north of south of 50 So we’ve seen Europe already go into economic contraction due to the trade wars right at this point We’ve seen the market falter right when we have fears of trade wars tipping Equity earnings over and having a negative effect on the economy. So what do we have every time we see that? The u.s. Gov to the rescue, right? Like we saw Steve minuchin back in December The government comes to the rescue says there’s going to be plenty of liquidity at all the banks and the market was manages to recover so the mat market gets back on its own feet and We go into earnings season and earnings start coming out positively and then the SP can continue to run from there So while it seems completely absurd that we are cutting rates with the stock market at an all-time high and with unemployment at 3.7 percent and with PMI, even at 51.7 indicating expansion and no sign of inflation. It does seem like preemptively a smart idea considering the ECB just turned full dove right after in response to their PMI is coming off if There’s no pivot by the Fed then we wind up with a you know widen the interest rate differential with us over a several other countries and probably a strengthening dollar right and in a really Super strong dollar is gonna hurt our exporters something that the president doesn’t want to me we can’t be the outstanding hawk on the planet right now because it would just Topple too much within the system which seems to be going along with just fine right now one of the things that’s interesting that Powell Said was that they’re not gonna change They’re not gonna cut the balance sheet down any more from here right to me that that’s directly addressing the fact That’s that’s for Trump. Right? That’s to say that okay Look, we’re gonna leave the balance sheet right where it is So that it doesn’t mess with the stock market the 25 basis point cut seems like it’s rational in response to p.m Eyes around the world coming down and US PMI coming back. So if we Fall below 50 and start seeing drag on economic data. They will look smart and have said, okay we’re a little bit ahead of this and As you would have expected He left the door open for another rate cut And the reason that he has to do that in my opinion There’s no way that the Fed can almost never anymore signal that they’re done for good cutting rates because then their risk is They say that they’re done cutting rates the economics of the u.s. Stay sideways too firm and the stock market backs off Now, what do you think? They’re gonna have to do if the stock market backs off? They’re gonna have to cut rates Are they gonna have to go there do something? So to me, it makes sense for them to say yeah that you know We will address as time goes by we’ll make it data dependent, but they definitely didn’t rule out another rate cut So it seems to me now as the markets go It seems like the equity market is probably gonna go by business as usual, right? I mean there’s a little bit of a dip today in response to It’s probably sell the fact type of response where we were expecting a quarter of a point We got a quarter of a point. Nobody knows really what’s gonna happen next So let’s probably take profits on the stocks that we’ve bought in the last three to six weeks at least right? So that move doesn’t scare me And nor it is it I’m not gonna be one of those guys that’s out there saying, okay Here comes the big tumble right rather I would be looking to posture myself to buy a dip in this environment if we get an SMP pullback – it’s moving averages I would certainly take a chance and look for the stocks that I want to get long and buy them Will that be the 50-day moving average 200-day? Yeah somewhere in there depending on how fast it gets there right rate of change is everything so if we fall down there and the next You know two sessions. I might be a little hesitant if it takes us two weeks To sort of back and fill into that area then I think it’s a good idea to you know Sort of do some shopping and get a little bit longer the stocks that you want to buy or put a new length on In stocks that you’ve been looking at and and have you had on your radar So I think that’s the way that I’m gonna play it. I’ve still got a fairly outsized bond short position on for me And I’m trafficking right now in IEF. That’s the seven to 10-year Treasury ETF My premise for the bond short was that interest rates had fallen too far? given the strength of the economy Right all of a sudden it seemed to me like the Fed was on hold and then they said okay we’re gonna respond to changes in market and we saw some economic weakness abroad and Bonds just went on a run and absolutely, you know knocked interest rates much lower across the curve But we’re still sort of being sensitive and I think that the Fed is also being sensitive to that curve Right because the big alarm that everybody watches is the three-month ten-year spread Three-month ten-year spread touched down at zero in March of this year When that spread touches zero agos inverted a recession has followed more often than not right So I think the Fed is saying, you know, we’re seeing numbers come off abroad. We’ve got this three months ten months three month ten-year spread as a little bit of an alarm going off in the office saying there’s usually Recession that follows this and so maybe they’re being prudent and following along with that narrative in their rate cut So the bond market to me This is going to be another test I mean since I’m in the 10-year part of the curve, I’m gonna talk about that But to me, this is gonna be the ultimate test of 2% in the 10-year I’ve been calling it the Battle of two percent right rates came from a high of about three and a quarter or so Came tanking down to 2% in the 10-year and so far we’ve been sideways, right? So I’m looking for more and more data in the US to sort of hold steady or Maybe even improve and to catch the bond market which has gotten overly overly optimistic and bullish off Sides to a point where the bond market has to sell-off and 10-year yields have to trade up higher So this isn’t a generational trade, right? This is just a feeling that the bond market is overbought Sentiment is overly bullish Everybody is positioned long And so let’s take a chance at fading that and seeing if the US economy stays sideways and we have a chance at rates Retracing to where they came from. So that’s basically the way I’m playing it It feels like stocks can probably hold the dip and go on rallying business as usual, right the Fang complex is still Driving the markets and you know performing fairly well So would that be a short-term trade or you bullish on the markets in general for more of a longer-term picture as well? Yeah, I mean You know my timeframes Jake are usually somewhere from you know Trading timeframes or a week to two months and investment timeframes are sort of three months to a year Maybe a little bit beyond kind of thing You know if you get lucky and something really continues to perform but for a bond trade This is something that’s very tactical right where I am, right? I You know yields fell to 2% I put the trade on at this level and Sort of when they break if bonds rally and break through 2% That’s where I get out So I’m not risking a large amount of money at all I just kind of waited for them to get to this level I sold Treasuries via the ETF and I’m gonna see what happens now, but Most importantly. Like I said, I think that the equity market can probably sustain this I feel like no matter What if there is another steep pullback in equities that we’re gonna hear from Steve minuchin again? I mean, they’re not gonna change the game plan at the White House or at the Treasury, you know The goal is the stock market to continue up into the right and it seems like President Trump continues to get his way So that’s my wrap-up. I mean as long as I Originally thought it was really Trump induced rate cut and now I feel like it might be just the prudent thing to do for markets and The thing about the balance sheet to me that’s saying that they don’t want to do anything. That’s gonna Cause anything to raise rates in any way? Which the balance sheet tapering could do and I think that’s sort of another throw in for Trump so that he can know that they’re not going to tamper with the balance sheet And so that’s where we are now I think it might be business as usual for stocks and I’m gonna keep fighting this bond short for as long as I can so we just saw Powell speak and actually the Dow fell about 400 points during his press conference as he was talking about This may be a one and done type of a rate cut and during a mid cycle But let’s say the data does stabilize and we don’t get more rate cuts Is it back to you know bad is good good is bad. How do you see it playing out then? It goes back to listening to what Trump wants quite honestly if you ask me I mean, I think it’s I think that the sort of bounce off of the lows You know when there was some iteration of Powell saying that we may be being a one-and-done rate cut situation I think that may have been coincident sold type of thing I’m really all about where the market closes on the day. And I think that once all is said and done today It will look just like a sell the fact sell-off in stocks where it’s nothing fatal But it proves to be a reason for stocks to pull back off the all-time highs, right? It’s not like we’re having a pullback from mid. It’s not like we’re plunging to lower levels We are simply having a pullback from the all-time high so You know in as much as the president wants to keep that going Say that it that the situation stabilizes the economy stabilizes and there’s no rate move in either direction If central banks around the world continue on their dovish path and lowering interest rates, you will hear from the president Pressuring the Fed right? And we’ve also got to see what happens with trade wars, right? Because the tariff war does not look like it’s gonna end anytime soon We just spent about a half of a year in a positive feedback loop in the stock market where the stock market rallied every time there was a sniff of talks about Trade tariffs and coming to any kind of a you know negotiation situation That turned out to be completely false, right? Like there are no there is no imminent solution to the rate talk. So in as much as this is something that continues on It continues to put pressure on European and perhaps the Chinese economy They continue to lower rates in response It would not be outrageous to watch the Federal Reserve have to pivot back dovish again and say you know what? We don’t want to be the outlier here because that’s what it’s become. You know, that’s what it’s become There’s no longer a the US economy is fine we don’t need to change rates right in the FOMC statement Powell actually mentioned things like the brexit and The debt ceiling as reasons for concern and that’s when I want to you know Grab the television screen and go are you kidding me? You know, that kind of thing is that rages to me? So we’re not managing our own economy with our own interest rates or our own currency within our own borders So it seemed like we should be most attentive to what’s going on here That’s not the case anymore so that’s why you’ve got to watch and see what’s going on around the world because it seems like the Powers that be or the central banks have done a pretty masterful job at managing Coordinated currency destruction, right? We’re all lowering rates around the world at the same time and it’s everybody in the boat so the dollar has been sort of the stock absorber, that’s right in the middle and sort of does it really rally meanwhile this and Existential battle going on on fin 2 it every day about whether the dollar remains a reserve currency or not You know, so to me the central banks are making it pretty clear that it’s gonna stay exactly where it is Especially if you have you know countries like Japan pinning rates to zero, etc, etc So that’s my view from here Jake And so there is a weak global growth. We’ve seen in Europe if you across the globe Are you worried about a recession here in the United States? Yeah only because I don’t want to blow off the bond market, right? That’s that’s my thing. I don’t know. I will never know. I am NOT capable of predicting All I can do is read the signals and look at history and decide if I want to trade on them, rhyming or not Right, so I’m really I don’t look out my window and feel a recession or I don’t see one, you know It’s still tough to get a steak reservation in New York City on a Tuesday night So maybe this isn’t a good place to look for a recession, etc But I don’t really see us slipping into one The way corporate earnings have been the way you know, it feels like the economy is hanging in there It feels like the technology side of the economy is really booming And now the transport side of the economy is starting to boom again while other sides of the economy are slowing down As long as the consumer remains strong which we’ve been and we’ve got exceedingly high consumer confidence across the board I don’t see it yet. I don’t see it yet I’m not gonna say that it’s not gonna happen and my eyes are wide open and I’m ready to trade it But I don’t see evidence of it yet I really don’t so we have to watch the spread and see if the bond market stays where it is with the three-month ten Ten-year spread either flat or inverted and to see if that’s proven the same as the last two times whereas after 2000 and 2007 where a nominal tea GDP took a tumble right after that But it doesn’t seem like we’re set up for the same situation because we don’t have two crises to put us out of anymore. So Unless there’s one that I’m not catching yet. All right, Cody. Thanks for breaking it down for us We’ll see how it plays out in months to come. Thanks so much for joining us. You’re welcome Jake. That was great you You

28 thoughts on “? What the Fed Rate Cut Means & How to Play It (w/Tony Greer) | Stock Trade Ideas”

  1. How about you invest in some Polytubes so you can supply your cities? I'm sick to death of a whole society that can only discuss money. Money to make money is not the point of money!

  2. so stock market is basically propped up on liquidity and that's it. So you got 2% more liquidity then markets will tank. Also biggest seller of Bonds just quit selling. You need dollar to lose confidence for bonds to sell off.

  3. Apparently, it's a permanent bull market based solely on debt and counterfeiting. Who knew it could be that simple?

  4. He’s shorting bonds at the beginning of a fed rate cut cycle? I guess that could work as a short term trade but I wouldn’t fight the fed long term…

  5. Don't take advice off someone with tattoos all over their arms. Too many shills talking a good game. All this bs trading in stocks, creates zero value in the economy.

  6. The Fed is unconstitutional. End it. According the the constitution, the authority to coin and print money belongs to Congress. I don't know where Tony Greer went to school, but if he thinks the Federal Reserve Banking system has any business being at war with the President, he isn't very well educated.

  7. What's he blabbering about? Consumer confidence is bearish for stocks. The highest CCI readings occurred in early 2000. It's almost back to those levels.

  8. Don't forget the large numbers of people working numerous jobs and deep in dept. The government is going deeper in debt. Negatives will have an impact

  9. Dollar going a bit up in August but then Gold and BitCoin hedge. I'd sell all S&P shares and buy the dip. Just connect the dollar to something of value like Gold. Trade war continues.

  10. Expansion with no signs of inflation? Have you shopped for your own groceries lately? Expansion is inflation.

  11. No human being can analyze vast amounts of qualitative and quantitative data for Stocks, ETFs and Currencies, FinBrain does that for more than 6000 assets, you can visit our website for more.

  12. Lol the guy's visible tattoos completely invalidated everything he said, what a clown, put your clown shoes on clown. SMH……

  13. These two must live and work in the Wall Street section of NYC. There may be four exports from America. 1) Military=whether the host country likes an outside force holding its elected leaders hostage, as a popular saying goes "It is what it is?" 2}This is difficult to classify, "missionary or religion workers"=are these truly spiritual or spies for/to uSa? Tough kitties if the local strong person wakes on wrong side of bed? 3)Any kind of Porn=live, blond, boobs, long legs & nails mostly fake but natural too and then there is broadly framed video landscape(billions involved). Old fashioned prostitution, with new ideas, is around. and what these two are promoting 4) Capitalism=working great? Don't think about tomorrow or what comes what may. Forget rewards like retirement, health ect Just spend, buy, spend and buy! Hucksterism!

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