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Today is the day. The Federal Reserve will decide whether to raise interest rates by 75 basis points or 100 basis points.
Typically, this would be another day in the office.
But the Fed's rate hikes are historically an ugly challenge to the global economy. As I'm about to explain, aggressive rate hikes have created crises around the globe time after time.
Every time the Federal Reserve aggressively raises interest rates over multiple meetings... a bomb goes off somewhere.
You can see in the chart below that sovereign wealth crises, or domestic credit problems tend to emerge from multiple rate hikes.
We've already witnessed an implosion of debt in Sri Lanka.
It appears that Panama could soon experience a dramatic economic problem.
Add more than two dozen names to this list.
I'm most concerned about a credit bubble here in the United States. The housing market is showing cracks... and Americans are still putting too much money on their credit cards.
I think you need to be cautious - even if momentum is positive this morning.
We are in the middle of a volatile week - and we might start to see the next leg down form as soon as Thursday or Friday.
We will be ready for it in the World's Biggest Trade.
Wednesday's Momentum Reading
Momentum is Green heading into Wednesday.
Chart of the Day: Inflation Nation
Yesterday, someone challenged me to suggest that there hasn't been any significant inflation in the United States until the last 18 months.
So, let's just look at the numbers, shall we? The reality is that inflation has plagued us in things that WE NEED. Education, housing, food, and college.
Over the last 22 years, things have gone up... up... up... The things that are highlighted in yellow are things that the government heavily subsidizes.
Meanwhile, technology costs have come down... down... down. Do you care more that the price of college has gone up 200% or that televisions have come down 95%? If you answered the former, you're smarter than any of the current members of the National Economic Council.
- From the previous evening, watch Hawaiian Holdings (NASDAQ: HA) and Boyd Gaming (NYSE: BYD), given their expected earnings' extremely high implied volatility.
- Executives of Sturm Ruger & Company (NYSE: RGR) and Smith & Wesson Brands (NASDAQ: SWBI) attend a hearing called "Examining the Practices and Profits of Gun Manufacturers" before a Congressional Committee.
- The Fed will announce its decision on interest rates. The markets have priced in a 75-basis point hike, although there is still speculation around a 100-point hike. The rate decision comes at 2:00 pm, and Fed Chair Jerome Powell will speak at 2:30. Be sure to WAIT until around 2:35 before trading the Fed's decision...
- Headline earnings reports come from Meta Platforms (NASDAQ: META), Shopify (NYSE: SHOP), QUALCOMM (NASDAQ: QCOM), Ford Motor Company (NYSE: F), Boeing (NYSE: BA), ServiceNow (NYSE: NOW), Teladoc (NYSE: TDOC), Etsy (NASDAQ: ETSY), Bristol-Myers (NYSE: BMY), and T-Mobile (NASDAQ: TMUS).
We have a packed show for you today on Midday Momentum at 12:30pm ET. The Fed... Earnings... and the notoriously bad Thursday. You're not going to want to miss it.
To watch an episode of Midday Momentum you may have missed click here to watch a REPLAY.
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About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, consultant, and political risk analyst with decades of trading experience and degrees in economics, cybersecurity, and business from Johns Hopkins, Purdue, Indiana University, and Northwestern.