Are Interest Rates Topping Out?
As the FED and markets continue to jockey for the accelerated growth they anticipate, we see indications that that the First Quarter GDP that we are 2/3 through may be the high growth rate of the year, and maybe even the high absolute number for the year.
Threats to Growth
We see at least three factors pointing to that possibility;
- Deficit funded tax cuts that are in essence a parachute clause for the upper class through induced stock buybacks..
- Trade issues that are compounding..
- A Political Firestorm is building that will make Watergate look like a kindergarten class..
The Fracture is getting closer, sometime before mid-year.
What this means for our Portfolio is:
- Stocks will start a major decline through the February lows with the first stop on the S&P being the 2311 level that we have mentioned before..
- T-Bond interest rates will decline to under the 2 year rate as the FED will hold up the short rate as things unravel..
- The Dollar will head towards the 2008 lows..
- Gold will rise to much higher levels as the Fear Trade takes focus..
How we are Handling this Setup
1. Tomorrow’s Payroll report should setup some good buying opportunities on T-Bonds and Gold, and selling/shorting opportunities on stocks.
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