Karpel’s Corner: Rise in the Two-Year Could Tip the Hand of the Fed

Welcome to Karpel’s Corner. This is where I throw out my thoughts on the markets and share some of my favorite strategies. I keep it market-focused, and never miss an opportunity to teach trading strategies and commentate on the latest trends affecting the financial markets. Hope you enjoy today’s post!

Yesterday, we discussed the rise in the two-year as a potential sign of good things for the Equity Bulls.

Let’s give the yield curves a closer look. In the past, when the short-term curves were moving up and the long-term curves (i.e. the 10-year) were flat-to-low, this signaled a quicker pace in tightening monetary policy before inflation reared its head. This puts a spotlight the FOMC meeting next week to see if the Fed puts language out in the statement that would indicate that rates will move in advance of what the markets are anticipating as far as rate hikes.

This would again be positive for US equities, so I want to stay focused on having a solid bullish conviction list ready. I recommend building a conviction list because the initial reaction could be some nervous profit taking and that could be a great opportunity to scoop up some highly rated bargains. Do your homework over the weekend (Click here to see how Tradespoon can help).

See you next time at the Corner!