Interest Rate Futures have just begun to turn negative, implying the chance of another market drop happening throughout 2022 - here are my thoughts, what this means, and the chances of this happening - Enjoy! Add me on Instagram: GPStephan…
Interest Rate Futures have just begun to turn negative, implying the chance of another market drop happening throughout 2022 – here are my thoughts, what this means, and the chances of this happening – Enjoy! Add me on Instagram: GPStephan
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Welcome To: The Federal Fund Rate Futures.
This is the future price that represents the interest rates that banks pay when they lend money to each other, and this price will fluctuate over time, and then “Settle” on the last day of each month, essentially locking in that contract price for those specific dates.
But beginning in September of 2022, some contracts have begun to price in a NEGATIVE FEDERAL FUNDS RATE…meaning, they’re betting on a scenario where contracts are trading for OVER $100….at which point, you’re basically just saying: I’m willing to lose money…just for the guarantee that I’ll have a safe place to park my cash….
Since the beginning of the year, The Federal Reserve has been facing an uphill battle of inflation – while supply chain issues, low interest rates, and stimulus packages have caused the price of everyday items to rise at their fastest level in 30 years.
For some people, that’s great – it means that inflation causes certain assets, like stocks, commodities, and real estate, to rise in value…so, if inflation goes up 3% in a year, so does your investment. Other people say moderate inflation is necessary to keep our economy going, because – if we KNOW our money is going to lose a little value every year – it encourages us to either spend or invest it back into our economy, which keeps us growing.
The PROBLEM, however, is when inflation begins to eat away at the purchasing power of your money, FASTER than you’re able to make it…and, right now…WAGES simply can’t rise fast enough….leading us the new revelation: INFLATION MIGHT NOT BE TRANSITIONARY.
In terms of future rates, one asset manager believes that we could very likely see low – or negative interest rates…forever, based on HISTORY. His research dives into what known as “Secular Stagnation,” which has identified a downward trend in interest rates dating back over 700 years…predicting that “real rates could soon enter permanently negative territory.”
Either way, we could have a situation where – BOTH are right: We could see short term overnight federal funds rates getting pushed negative if the economic outlook starts getting worse….while, long term, interest rates expect to rise to help offset inflation.
BUT…that doesn’t mean that rates will actually end up going negative, and only time will tell how this pans out. Most likely, this is simply due to a fear of the new illness potentially wrecking havoc on the economy…and, the markets are looking for any excuse to spark a sell off.
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*Some of the links and other products that appear on this video are from companies which Graham Stephan will earn an affiliate commission or referral bonus. Graham Stephan is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available. This is not investment advice. Public Offer valid for U.S. residents 18+ and subject to account approval. There may be other fees associated with trading. See Public.com/disclosures/
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