The last time we had this Fed setup, these safe 6%+ paying bonds jumped 20% in the year ahead!
The setup? The likelihood that short-term interest rates (as set by the Federal Reserve) will go nowhere over the next 12 months. To see this we’ll turn to the Fed funds futures, which are contracts that reflect real money being bet on the Fed’s upcoming action (or lack thereof). Collectively they comprise the smartest crystal ball available this side of Jay Powell.
Right now, the smart money is giving “no hike” a 75% probability between now and January 2020. And when we add in the bets on a rate cut or two, we’re looking at a 92% chance that rates will either be unchanged or lower this time next year:
Smart Money Bets 75% “No Hike” for 12 Months
This is bullish for – you’ll never guess – floating rate bond funds.… Read more
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