This past weekend, I asked you to share your biggest worries about your money. And as I suspected, the Fed's pursuit of aggressive interest rate hikes and the potential for a major market correction are the most important issues to you right now.
So before the talking heads on the news convince you to pull all your money from the stock market and stuff it under your mattress, let's talk about everything they're not saying –
And how you can best protect your money…
Here's Your Video Summary:
Q: My main concern is how the various short-term items you mentioned (i.e., oil, interest rates, etc.) will affect short-term trades? Also, is there an alternative to trading spreads when it's not allowed (like in Canadian-registered accounts)?
If the Fed keeps its "promise" to raise interest rates at least three times this year, you'll likely see these higher rates drive the markets down. Commodities, such as oil, will likely move with the markets, so you could see these fall as well. Keep in mind that a lot of the "what if" scenarios you may be seeing in headlines have already been baked into the markets.
But if the rate hikes don't come as often or as furious as we've been led to believe, I actually see the markets moving higher. We'll also likely see the U.S. dollar get weaker and commodities move higher. Now if we get more than three rate hikes this year, we'll see interest rates spike, bonds drop, commodities drop, and currencies against the dollar weaken.
Q: Dramatic increases in infrastructure by Trump coupled with Fed rate increases don't seem to work well for the U.S. budget process. Your thoughts?
The potential for a dramatic increase in infrastructure coupled with Fed rate hikes probably won't work well for the U.S. budget process. That said, again, a lot of these types of scenarios are already baked in to the markets. And the pattern I'm seeing is that there's a difference between what's said on the campaign trail and what actually comes to fruition in the White House. So just because you hear something doesn't mean it will become law. And as traders, we've got the unique opportunity to profit no matter what comes out of Washington and no matter how the markets react.
Q: Hi Tom, my biggest concern for the markets right now is a major pullback – along the lines of the 2008/2009 – driven by global factors. Though this is partially driven by the media hype, it also seems like all the craziness out there right now isn't going away any time soon. What do you think?
While I am concerned about a pullback happening in the markets, remember that we don't want to "bet the house" on this happening… and then it doesn't. Betting the house on anything happening is one of the fastest ways to lose your money. And even if it does happen, don't worry… I'll be showing you a low-cost strategy you can use to hedge against the markets within the next few days.
Q: I am worried that even when tightening stops, trades will gap still gap all the way down (and just skip any stops). What's the best way to guard against that?
The best way to eliminate stops in any situation when it comes to stocks is by using options. Options will alow you to reduce your risk in equities – and that risk is limited. You can also use options as insurance and speculation for any potential move in the markets. That's why you can always find a way to profit from the markets, no matter if they're up, down, or sideways.
Q: When do you believe the overall market will correct by more than 5%?
The overall market corrects by more than 5% every year. This isn't an unusual occurrence; it regularly happens. In fact, we saw a 15% correction just last year before moving to new highs. I do think that if it happens, it'll be short term and will happen within the next 60 to 90 days. And as I said, I'll be showing you the best way to hedge against a market pullback very soon. So stayed tuned.
Until next time…
America's #1 Trader
About the Author
Tom Gentile is one of the world's foremost authorities on stock, futures and options trading.
With more than 25 years' experience trading stocks, futures, and options, Tom's style of trading systems and strategies are designed to help individual investors propel themselves past 99 percent of the trading crowd.