Tuesday, 10 September 2024

We’re at the wheel

Stop giving the Fed so much power
 
   
     
   
 
SEPTEMBER 10, 2024
   
Editor’s Note: Today, I get to sit down with Chris Pulver to learn about his $100 Challenge first-hand. But if you haven’t already caught this phenomenon, you should check it out here! I was LIVE with Chris as he placed the trade this morning, and saw the testimonials from happy traders flooding in as he closed out his alert in a matter of minutes. You could join that very same trade tomorrow morning, if you check this out.
 
Hey y’all,

How are the markets treating you this week?

I hope things have started ok.

This morning, I want to talk about two things… 

I was planning to tell you about an interesting argument I heard on a podcast yesterday… and I’ll still get to that…

But first, I saw this headline, and it ticked me off:
 
 

Why is financial media so intent on giving the Federal Reserve such power over the stock market?

It isn’t the Fed or economic data that drives the markets. As we talked about recently, it’s traders who drive the markets.

Yes, maybe they’re responding to data from the Fed this week. But how short is our memory?

Wasn’t it less than two weeks ago that the entire market crashed because traders had a panicked overreaction to NVDA’s earnings?
 
 

The markets will respond, however they want to, to whatever data is presented to them.

But the Federal Reserve is not pulling the strings of the broader stock market in some kind of Machiavellian fashion. They’re barely pulling the strings they’re supposed to pull.

Which brings me back to the podcast.

I listened to a new podcast last night called The Market Huddle — it was actually recommended to me by Chris Pulver.

An economist named Dario Perkins was on, and he had a very interesting take on the Federal Reserve.

I’ll admit — a lot of it was over my head! But, basically, he argued that over the next few months, if we do indeed manage a “soft landing,” the Central Banks are going to take credit when they really shouldn’t.

They’re going to say that it was all because of their perfect timing; spiking interest rates at exactly the right time, and releasing the pressure just when the economy needed it.

But the truth is, there are fundamental economic changes that allowed for the “soft landing,” NOT tighter or more lax monetary policy.

You can look up Perkins’ work to see more about what he had to say.

But I did find this tweet particularly enlightening…
 
 

I think because Jerome Powell wears nice suits and has an official-sounding title, we forget that every person who has a job, anywhere, from President, to Fed Chairman, all the way down to your local Uber driver is just a human being that is prone to making mistakes.

The Fed is no different.

They’re not brilliant warlocks huddled in a boardroom pulling the strings of monetary policy with divine precision.

They’re a bunch of pretty smart people who think they’re really smart and are guessing at what to do next.

So when rate cuts come next week — and they are coming — remember that the fallout isn’t because of the Fed.

It’s because of how traders like you and me interpreted what the Fed did.

You have to be prepared for either outcome.

Over the next week, you’ll hear a lot from our traders on how to get yourself ready for that fallout.

But don’t forget: it’s not the Fed that drives the market. It’s traders.

To your prosperity,

Stephen Ground
Editor-in-Chief, ProsperityPub
 
   
 
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