A rate-cut, or a rate-hike?

By Hoda Mehr Mon, Jun 17, 2019

The two-day central bank’s policy gathering kicks off June 18, and many investors are expecting the first-ever interest rate cut in the last ten years. The rate-cut expectation is boosted by Vanguard’s commentary related to the higher possibility of economic recession in the next 12-18 months and consequently the higher likelihood for an “insurance” rate-cut by the Fed to avoid it. Vanguard is one of the largest asset management firms in the world and the value of the asset under the firm’s management sums up to $5.4 trillion. That’s why when Vanguard says something, investors tend to listen. The rate-cut expectations are further heightened as several tariff negotiations between the U.S. and other countries such as Mexico and China have created a volatile stock market. Overall, it seems that the market has already concluded that the Fed will protect the economy by avoiding any rate-hike and will even go to the extreme of cutting the interest rate.

But, there are also arguments for a rate-hike! June 30th marks the 10th anniversary of an economic recovery, and after that, we are officially entering the longest market rebound in the history of the United States. Of course, nothing is set in stone, and just because we are about to make a historical moment, it doesn’t mean that it will come to an end soon. But, setting a new historical record is a good enough reason to believe that the economy doesn’t need protection and a rate-hike is not only likely but also reasonable and necessary.

A rate-cut, or a rate-hike, which one is it gonna be? We will know soon, and either way, a group of people will be disappointed and surprised and that’s enough reason for further volatility in the market as we start this week.

• Bond: In the last few days and weeks, in response to the interest rate uncertanties, the ETFs that invest in short-term bonds have seen the highest money inflow. Investors are pouring money in bonds with short-term maturity targets as a hedge agiasnt the expected volaity in the short term, and uncertianties in the long run.
• Overall Market: The Fed is dealing with a difficult hand. We are getting ready to set a historical record in economic recovery, but several tariff negotiations, lower than expected inflation rate, low unemployment rate, and market volatility are some of the contradicting economic indicators that this week the Fed has to deal with and come to a final decision as to whether to cut or hike the interest rate.

What you need to know about the longest economic recovery in the world 

When June comes to an end, the economic recovery in the U.S. sets a historical record enters into the longest economic rebound. If the economic recovery continues until January, the globall economy will also set its only record in the world’s history. But, why does such a bull market doesn’t feel like a victory?

This economic recovery has also been the weakest. For example, in the past, the recovery in the U.S. use to come with more than 4% annual GDP growth rate, while the latest bull market has been accompanied by only half of the usual GDP growth rate in such times.

After the financial crisis, the governments started to protect their industries and fuel the economy by the so-called easy money. Consequently, weeker companies have lasted longer without creating economic value. Also, the boost in the valuations came from tax-cuts and not from higher value creation power. The growth has been fueled by the big companies getting bigger and the gap between the rich and the poor has gotten wider. While the recovery is setting historical marks, the impact is not as widespread as people have hoped for. The longest recovery in the economy doesn’t seem to seem to be the most impactful.

Teeka Tiwari to Share His Favorite Cannabis Small-Cap on June 26th 

Teeka Tiwari has personally investigated dozens of cannabis small-cap companies…

And is about to release a new report on them.

In this photo, he’s visiting a little-known small-cap…

One he’s calling the “Canadian Amazon of medical CBD.”

To get the details on his new report…

Click here to automatically sign up for this information.

The stock market was down again on Friday. What happened? 

The Dow and the S&P 500 index wrapped up the week slightly lower than when they started the day on Friday. The Technology (- 0.87%) an Energy (-0.65%) sectors were slightly down and forced the overall market to finish in the red. Having said that, year-to-date stock market performance has been outstanding. Despite all concerns, investors have not been disappointed with the market since the beginning of the year, with the technology sector leading the pack with a year-to-date return of 22.78%.

The pure-play online pet store, Chewy.com (ticker CHWY), went public on Friday and the stock price rapidly soared by 85%. For a few hours, the vibe was 1999 again. A rapidly growing company without profit that sells pet products was the talk of the town. Sound familiar? Ha? Pets.com any one?

However, this time the exuberance didn’t last long and the stock finished its first day as a publicly-traded company lower than where it started and with that, we may all breath calmly that the logic is not all lost. This is, of course, a very different company compared to Pets.com and it actually sells billions of dollars worth of pet products to the consumers. Backed by PetSmart, the company is also in good financial standing. Despite all that, no profit, no glory just yet.

Investors are not happy with Charlotte 

Shares of Charlottes Web Holdings Inc (ticker CWBHF) was down more than 8% on Friday. The world’s leading brand by market share in the production and distribution of hemp-based cannabidiol wellness products is one of the cannabis stocks that is operating in the legalized side of the emerging cannabis market in the U.S.. The stock price-fall came after a disppointing quarterly results. When the valautions are as high as they are in the in the cannabis sector, even a short-term and temporary miss can cause rapid fluctuations.

FOMC Speaker Kaplan at 1:00pm

Fed speaker Kaplan has been dovish as of late. The market will be listening to to see if he continues his dovish stance on rates, and what he thinks about the current trade disputes between the US, Mexico and China.

Remember Google’s Smart Glasses? So much hype and then poof, nothing! It took only a few months before the tech giant’s the next big thing turned into a symbol of pretentiousness in Silicon Valley. The cool kids couldn’t run from it fast enough. But, smart glasses are not dead yet. They just are not manufactured by Google. Shares of pure-play smart glasses manufacturer, Vuzix Corp (VUZI), are up 72% in June 2019 after the company announced the product can now be used for streaming video and comes with facial recognition features. Who knew! The world is getting closer to sci-fi movies, and Vuzix may just be the brand that will make it happen sooner than we all expected.

The former well established Republican Congressman from California ended up on TMZ Wednesday to talk cannabis. Rohrabacher, who’s now invested in the weed industry (who isn’t?) says his former colleagues on Capitol Hill are already working on legislation to allow all Americans toke it up legally…from sea to shining sea.

About the Author

The authors of this Scoop are the editorial team at Stock Card, led by Hoda Mehr. Hoda Mehr is CEO and Co-founder of Stock Card and the host of Renegade Investors podcast. She runs a community of 40,000 stock market investors and manages Stock Card's successful flagship portfolio, Roll with Our CEO, on Stock Card Portfolio Store. Hoda is an Economist with an MBA from Concordia, John Molson School of Business. She applies behavioral economics, data journalism, and storytelling to all aspects of her work. Before starting Stock Card, Hoda worked as a strategy and insights lead at technology companies including Symantec, Aimia and Sony. Create a free account to do your stock market research easily and mistake-free: Stock Card Stock Card