Rates Are Close Peaking; I Am Cautious On Equities

Summary

• Silicon Valley Bank's collapse signaled the impact of higher interest rates on the U.S. economy.
• The Fed Funds futures market expects the Fed to start cutting rates towards the end of 2023.
• Consumer spending will face more challenges as pandemic relief programs expire.
• Interest rates could fall further as investors seek out safe havens due to higher recession risk. Negative forward equity returns seem likely.
• Long short-term and long-term treasuries versus a short SPY and/or IWM position could be an interesting 6-to-9-month trade.
• I do much more than just articles at Cash Flow Compounders: Members get access to model portfolios, regular updates, a chat room, and more. Learn More »

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Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Short position through short-selling of the stock, or purchase of put options or similar derivatives in SPY, IWM IEF over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I have no position in NVDA. I may initiate the trade discussed in the article (long bonds vs. short equities) over the next 72 hours.