Very Interest-ing

Interest rate hike expectations have inflated substantially.   The market likes transparency.  And the FED has been transparent that they intend to raise the Funds rate from historic lows.

The first rate hike is coming in March.

In March the CME gives a near 80% chance of a .25 hike.  Small.  And yet symbolic.  Clearly the market has already priced this in.

By the end of the year, the market expects 3 to 4  .25% rate hikes.


Clearly the market has already priced this in.

Mortgage rates have soared some .75% in the last month, to levels not seen in a  year.

I'm not sure how much higher we can see the 30 yr go without having a serious affect on housing prices.  We know housing and the economy go hand and hand.  And sure the stock market isn't the economy, but we know what underwater houses mean for the banks, the consumer, and housing.

My point here is that right now... as crazy as it sounds... we could already be seeing the stock market pricing in peak interest rates from this rate hike cycle.

If I'm writing that about four  .25% hikes of the FED funds rate,  the market has already priced it in.

I don't think the housing market can withstand any more than that.

And one thing is for sure, interest rates will remain lower over seas, keeping US treasuries well bid.

So... all this inflation talk.

I think its peak inflation.

Why did the market shrug off a 40 year record inflation number yesterday?

Low interest rates remain the key to higher asset prices.  A sharp spike higher will put us back in the scenario we had in 2006-2007 where assets were worth less than the debt products backing them.  And that is not a good thing.

Which is why I don't think its going to happen.

Could I be wrong...  Absolutely.

Will I be wrong.

I guess we will find out.


Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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