The Federal Reserve has made it very clear that they are determined to stick to a monetary tightening cycle, which means rate hikes are coming. This also means there is opportunity for us to short the bond market.
If you follow my work, you also know that I am one heck of an accurate predictor of what the Federal Reserve is a likely to do. As a matter of fact, I have been wrong only one time with regard to predicting when the Federal Reserve would actually raise rates ever since the Federal Reserve began talking about it. Only one time...
It is certainly no secret that the federal reserves unprecedented, never been seen before in the history of finance, interest rate/debt suppression cycle has been successful in re-inflating a housing bubble and a stock market bubble.
The fact that the Federal Reserve has not allowed the market to determine fair value for debt has created distortions across every single asset class.
Personally, all I want to do for myself (and for you), is to put us in a position to capitalize on these distortions.
The unwinding of the federal reserves unprecedented monetary policy is going to have far reaching consequences, and all of these will present us with opportunity.
If I am right with regard to the federal reserves next move, this will present to us with an opportunity to short the bond market.
The Federal Reserve meets next month, June, to discuss monetary policy changes.
In this meeting I expect that the Federal Reserve will be raising rates.
I also believe that the market will interpret the raising of the federal funds rate next month as a signal that more rate hikes are coming, what this also means is we should be looking to bet against the bond market.
One instrument that can be used to short the bond market would be via ticker BND, this is the Vanguard total bond market ETF. You could take a position against the bond market by buying puts on BND.
Now again, I could be wrong with my prediction that the Federal Reserve will announce a rate hike next month however, gauging from my past frankly extremely accurate record of predicting what the Federal Reserve is likely to do, I myself would not bet against my own call here.
Gregory Mannarino
