Jerome Powell, the chairman of the Federal Reserve, is panicking.
The Fed cut interest rates by half a percentage point last Tuesday. This was a huge move considering its gradual cuts and hikes were just a quarter of a point.
That cut was a critical moment.
The stock market was just 10% off its all-time highs. Stocks were looking to recover after just posting one of the best single-day rallies ever.
But the emergency interest rate cut caused a U-turn for stocks — and huge volatility the rest of the week.
In today’s Bank It or Tank It, I’m sharing my thought process during the current market volatility. And where I see the S&P 500 Index going from here.
It’s important you understand what’s at stake for the broader market — and your portfolio.
Check out my latest video to get my insights on the coronavirus, what oil’s plunge means for you and an update to my outlook for the S&P 500.
Check it out here.
I’m not one to call for a recession. But this time feels different.
I know we all want a nice round top like we saw in 2007 and 2008. One that’s easy to predict and trade along the way.
I don’t think we got it this time.
I’m actually rooting for a quick rebound.
But each market top is not the same. We saw a classic euphoric rally, leading to a blow-off top.
The quick crash signified it was a false breakout, and stocks are trending lower.
And now, stocks may be on the cusp of a massive 50% drop as the U.S. economy falls into a recession, due to fears around the coronavirus.
But not all hope is lost.
As I mentioned in the video, we’ll continue to grab profits along the way. In fact, we already did during last week’s volatile market, with 50% gains on two put options and a double-digit gain from adding an inverse exchange-traded fund.
Our game plan going forward is to take profits when they come and cut losses quickly.
One strategy sets us up the best in a volatile market: my Pure Income service.
This is my favorite approach at the moment. And every investor needs to consider this trading strategy in the current market.
My colleague Matt Badiali put together a special presentation walking you through all of the details. You can check it out right here.
Chad Shoop, CMT
Editor, Pure Income