Rate Hike Wednesday – How Will the Markets React?

Image result for Fed hike gdpThere is a 100% chance the Fed will raise rates today.

That's the consensus and I, of course, agree as I've been saying they HAVE to hike since the last meeting.  Now that everyone agrees with me, let's move on to contemplating the result of the Fed hiking and what it means for the year ahead.  Clearly, as you can see from the chart, the Fed is not hiking rates because the economy is booming.  The Fed is hiking rates to ward off inflation because a stagnant economy with inflation (stagflation) is even worse than a recession from the Fed's point of view.

Also, the markets are what Allan Greenspan liked to call "irrationally exuberant," which is also clear from the chart and it's also not good to see so much money chasing so little profit as it's a classic misallocation of resources and, while investors may not feel the need to worry about the future consequences of their current actions – the Fed certainly does and it is their job to pop these bubbles – as gently as possible.

We are very well-hedged for a correction in our Member Tracking Portfolios and I began a full review last night in our Live Member Chat Room.  In our Options Opportunity Portfolio, which is tracked over at Seeking Alpha, where we raised more cash and added more hedges on March 1st and that didn't stop our bullish positions from adding $7,000 over the past two weeks – with no adjustments – so I'd have to say we're very well-balanced at the moment.

Having a well-balanced portfolio is the key to long-term success.  You can't only make money in bullish markets or only make money in bearish markets or those dry spells can kill you.  Smart Portfolio Management is more like surfing, where we look for a good wave to ride and then try to stay on board for as long as we can and try to cash out before the wipeout.  When it's over, we paddle our cash back out to sea and look for the next exciting opportunity.  

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