What If It Just Doesn’t Matter What Trump Does With the Fed?

On paper, it seems like great changes are imminent at the Federal Reserve, ostensibly the center of the world’s most important economy.

Not only is Fed Chair Janet Yellen’s term almost up, but there are currently four open Board of Governors positions which, to my knowledge, President Trump hasn’t begun to consider.

But the top spot at the Fed gets the most attention, understandably, and there’s enough unsolicited advice for Trump than you can shake a stick at.

The Economist, one of the most respected financial publications in the business, recently ran an op-ed with the title “Why Donald Trump should reappoint Janet Yellen.”

The Philadelphia Inquirer echoed the sentiment with “Three reasons why Trump must reappoint Janet Yellen.”

Back in July, CNNMoney ran an article titled “Behind Trump’s love-hate relationship with Janet Yellen” that detailed the president’s flip-flopping support for the Fed chair. And a recent report in Bloomberg had the president considering at least six different people for her position.

In my opinion, it’s likely that she’ll be re-appointed as chair because her policies have led to record-high prices in stocks – which Trump has, naturally, bragged about – and you generally don’t want to mess with something if you’re getting the desired results and headlines. It seems as if every day brings a new all-time high in some corner of the stock market, even as storm clouds gather.

It should be mentioned that Trump doesn’t have the best record in getting people appointed, especially when they need to be confirmed by Congress. Considering that our political climate includes Twitter-based nuclear brinksmanship and White House statements on professional athletes, there’s no telling if and when Trump will bring wholesale change to Fed or just ignore it completely.

Maybe Yellen will step down early, like Vice-Chair Stanley Fischer did last month, or maybe she’ll just decline a Trump re-appointment.

But, all things considered, it doesn’t really matter.

One the most important Fed undertakings in the short term is the unwinding of its $4 trillion balance sheet – yes, trillion.

That’s a pretty big number, and you wouldn’t be blamed for thinking that offloading such a sizeable asset load is fraught with danger.

Of course, until it starts happening, there’s no telling what the market reaction will be. But the unwinding of the balance sheet is already a planned event that’s been disseminated to the markets, and the markets have been two steps ahead of the Fed for years now. For all its talking points and meeting minutes and policy hints, the Fed doesn’t move the markets nearly as much as it thinks it does.

If it doesn’t really matter what Trump does with the Fed, and if the markets affect the central bank’s policies far more than the reverse, then I wouldn’t be surprised if you wrote off the Fed as one big snoozefest.

You’d be wrong, but not in the way you expect.

I’m the creator of a unique strategy centered on making money off the fluctuations in long-term interest rates.

Those fluctuations often look like a couple tenths of a percent – a rounding error if you’re not keyed in. But they represent enormous sums of capital; they effect entire sectors of the economy. And, most importantly, they frequently come bearing serious opportunities to make money.

I have a system that helps me track these movements, and I’d love to show you a few examples of it in action…

On January 12, 2017, I saw that yields had steadily fallen over the last few weeks and had triggered an alert in my short-term system. This was an opportunity to make money on the quick snap-back higher in yields. This was a classic example of a short-term opportunity…

And, like clockwork, that snap-back happened just a week later…

My readers had the chance to book a 90% gain…

In the middle of June 2017, the Fed finally pulled the trigger on another rate hike. No big deal; the markets were well ahead of the move and had already priced it in. You’d think there wouldn’t be much money to be made on such an unsurprising move.

Well, you’d be wrong!

Investors were getting worried about the bubbly equity market and pushed long-term Treasury yields to new 2017 lows.

When rates snapped back, you would’ve had a shot at a 72% gain in eight days.

In early July, long-term Treasury bond yields had jumped sharply over a week. Interestingly, bonds and stocks were selling off, but this time it looked as though bonds had overreacted.

Why? Because my system triggered an alert…

Less than two weeks later, those long-term bonds came back to Earth, and that meant another quick win for my readers to the tune of 43%

See, a big part of the secret sauce here is volatility. Whenever there’s confusion over jobs reports, or another round of nuclear hot potato on Twitter, or a cryptocurrency crashes and rebounds overnight, you often see a ripple in the Treasury market.

Again, those ripples may look tiny, but trust me, they aren’t.

They mean lucrative opportunities are in play for my readers.

It also means the question of “What if Trump fires Yellen?” doesn’t really matter. The bottom line is – and always has been – this: Investing is a game of uncertainty.

I’m fine not knowing – and not caring – what Trump does with the Fed. The “What if” doesn’t bother me because I like my plan, and I like my system. I know I’ll be fine no matter what happens at the central bank.

But it’s not the only way to approach the market.

In fact, I’m putting together a special event where I’ll explain an approach that will you not just preserve but also grow your portfolio amid volatile markets that result from such “What If…” scenarios.

Click here for more “What If” scenarios and add our special event to your calendar.

I’ll reveal more about my strategy… and how I believe it could very well be the answer to ALL of the “what if?” questions we’ve been asking here in the last few days, on Wednesday.

Stay tuned…

Good investing,

Lance Gaitan
Editor, Treasury Profits Accelerator 

What Killed the Middle Class?

Today real incomes of the middle class are 5% lower than they were in 1970 and 12.4% lower than in 2000… when they peaked! How could this be?

In our new infographic What Killed the Middle Class?, we take a look at some shocking numbers to show how bad it’s become and what has been fueling this middle-class revolt.

 

LEARN MORE
Categories: Central Banks

About Author

Lance Gaitan graduated from Franklin University in Columbus, OH with a degree in Finance. After graduating and working as an auditor for an insurance administrator as a number of years, he attained his securities license. He then went to work as a broker for a small firm and during the mid-1990’s Lance managed the futures trading desk for Piper Jaffray, a large regional brokerage firm based in Minneapolis. After migrating to Florida in early 2000, Lance founded a futures trading firm, GSV Futures, specializing in retail commodity trading strategies. Lance sold that business in 2006 and joined Harry Dent, Jr. and Rodney Johnson at Dent Research shortly thereafter.