Prepare for More Volatility in 2024

Colin’s Note: If history is any guide, it’s a safe bet that the Fed will start cutting rates in 2024.

It sounds like good news. After all, lower rates favor consumers, investors, businesses, and borrowers… But cutting rates can also trigger a market crash.

History shows us that when the Federal Reserve begins a rate-cutting cycle, there’s a good chance a severe market downturn is right around the corner.

That’s why, for today’s video from The Bleeding Edge, I look at some ways you can prepare for 2024… and for all the volatility it promises to bring once the Fed kicks its rate-cutting cycle into gear.

Hey everyone, Colin Tedards here. We’re closing the door on 2023. It’s time to begin strategizing for 2024… and preparing for any market shifts that come our way.

First up, let’s talk about interest rates.

If you think the Fed cutting interest rates only sends markets higher, you need to pay attention today. Right now, there’s a two-pronged consensus.

Market expectations lean towards the Federal Reserve reducing rates by May 2024 – 10 months following the last hike in July.

Looking back on previous rate cycles, this 10-month time frame is actually a fairly long time for the Fed to wait to change its course. The only exception was the September 2007 cut. That one occurred 15 months after its cycle’s last hike.

Either way you slice it… If history is our guide, the Federal Reserve is set to cut rates in 2024.

Here’s where things get interesting.

The consensus is that rate reductions will favor consumers, investors, and the overall stock market. Businesses and consumers would welcome lower credit card, mortgage, and borrowing rates.

But the impact on the stock market historically hasn’t been good.

Reviewing the nine previous initial rate cuts, the S&P 500 index averaged a 20.5% decline in the months that followed. This includes severe market crashes in 2002 after the dot-com bubble burst and in 2008–2009 during the Great Financial Crisis.

While investors have been trained over the past two decades that lower rates are good for markets, the bottom line is this…

When the Federal Reserve begins a rate-cutting cycle, there’s a good chance a severe market downturn is right around the corner.

But, if that has you concerned, there’s more we need to unpack here. If you look out on a longer time frame, the picture changes. Six months after the initial cut, there’s an average 3.4% return in the S&P 500.

Things get better even further down the road. The depths of the dot-com crash and the Great Financial Crisis were fantastic times to accumulate stocks and build wealth.

So, how do you prepare for a 2024 that’s likely to be volatile as the Fed changes course?

The first thing we’re doing is moving our stop-losses higher for our paid-up Near Future Report and Exponential Tech Investor subscribers. If you are a subscriber to either or both of those services, keep an eye on your inbox for those updates coming later this week.

Setting stop-losses now – when market conditions are good – removes the emotions that can lead to mistakes when markets become more volatile.

The next thing to do is create a shopping list. Again, do this now before the emotions of a market decline set in.

Aside from the technology stocks wrapped up in the artificial intelligence (AI) megatrend that’s unfolding, I have my eye on several sectors that will benefit from lower interest rates. I’ll share those sectors in a future video.

Finally, be prepared to be far more active in 2024.

Again, history proves that when the Fed starts cutting rates, it can trigger a market crash. Just remember… fortunes are made by investors who know how to capitalize during that moment.

That was The Bleeding Edge for today. My name is Colin Tedards, and I look forward to seeing you again soon.

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