00:00:00
so the economy just flipped because the
00:00:01
Federal Reserve just announced that
00:00:03
they're cutting interest rates by half a
00:00:05
per. and I know that sounds like a
00:00:07
really small number but this will have a
00:00:10
huge impact on the economy the stock
00:00:12
market and your money and if you're
00:00:14
wondering how I was able to release this
00:00:16
video so soon considering the news just
00:00:18
dropped it's not because I'm a genius
00:00:21
it's because I took a peek at the CME
00:00:23
fed watch tool which has been predicting
00:00:25
this for a couple weeks now and based on
00:00:28
this rate cut I want to help break down
00:00:30
exactly what this means for Savers
00:00:32
investors the stock market Bitcoin and
00:00:35
of course magicians I'm going to show
00:00:37
you some really cool data about what
00:00:39
happened to everyone when we did this in
00:00:41
the past now the first question you
00:00:43
might have is why did the Federal
00:00:45
Reserve do this so let's rewind for the
00:00:48
last 2 and 1/2 years the Federal Reserve
00:00:50
has been raising interest rates to fight
00:00:52
inflation after the price increase which
00:00:54
went up to a 40-year high of 99.1% in
00:00:59
June of 2022
00:01:00
that was all thanks to the money printer
00:01:02
inflation at that level was comparable
00:01:05
to the late 1970s and early 80s when the
00:01:09
FED also raised their rates under their
00:01:11
Papa Powell at the time who was chairman
00:01:13
Paul vulker back then Paul vulker raised
00:01:17
their interest rates as high as 20% to
00:01:20
slow inflation which caused a recession
00:01:23
but fast forward to today we don't have
00:01:26
that same level of extreme inflation
00:01:28
arguably but the feds rate hikes over
00:01:30
the past 2 years have been the most
00:01:32
aggressive since the 1970s vulker era
00:01:36
and now the latest economic report shows
00:01:39
inflation has went down to
00:01:42
25% remember our goal is to get to 2% we
00:01:46
were at 9% at our Peak now we're at
00:01:50
2.5% and this cooling off inflation is
00:01:54
one of the main reasons why the FED has
00:01:56
decided it was safe to Pivot and lower
00:01:58
interest rates specifically something
00:02:01
called the federal funds rate or the
00:02:04
cost for banks to borrow money from each
00:02:06
other which directly affects our cost to
00:02:10
borrow money as consumers so that's how
00:02:13
we got here but now I want to share with
00:02:14
you some really interesting data about
00:02:17
what this means for the stock market
00:02:19
dividend stocks Bitcoin bonds Savers and
00:02:22
investors and at the end of the video I
00:02:24
want to give you my personal opinion of
00:02:26
how I'm investing so let's get into it
00:02:29
hi my name is Andre J hope you're doing
00:02:31
well come for the finance and stay for
00:02:32
the economy so first let me start with
00:02:35
the most exciting topic that everyone
00:02:37
wants to know about which is the stock
00:02:39
market and what this means for investors
00:02:41
now in the past when the FED lowered the
00:02:45
interest rate the stock market tended to
00:02:47
do well according to a study by Schwab
00:02:50
in the 12 months after a rate cut the
00:02:53
s&p500 the stock market has posted
00:02:56
positive returns in 86% of cases since
00:03:02
1929 data shows in the last 100 years
00:03:06
that the FED pivoted to lower rates it
00:03:09
was a good thing for investors not in
00:03:11
all cases but in 86% of cases and the
00:03:15
reason that it's not 100% is because if
00:03:18
there is a recession that changes things
00:03:22
if there's a recession the stock market
00:03:24
on average has lost 15% in the first 12
00:03:28
months so the followup question I had is
00:03:31
what are the odds of a recession the
00:03:33
good news is in 2024 according to the
00:03:36
stock market it's only 8% but the bad
00:03:39
news is it's predicting a 56% chance we
00:03:42
could go into one before 2026 so it's
00:03:46
kind of a coin flip but generally
00:03:48
speaking lower rates have helped boost
00:03:50
stock prices because companies borrow
00:03:52
money more cheaply which helps them with
00:03:54
their profits but it's also important to
00:03:56
remember that rate cuts are not
00:03:59
guarantee that the stock market will go
00:04:02
up because timing and context matters
00:04:05
too for example during the dotcom bust
00:04:08
when the FED lowered rates but the stock
00:04:11
market still went down 13% in the
00:04:13
following 12 months and again when the
00:04:16
FED started cutting rates in September
00:04:18
2007 in response to the financial crisis
00:04:21
the stock market also went down
00:04:24
17.6% but for the most part stocks do
00:04:26
tend to go up when the FED lowers rates
00:04:29
and here's a few examples when the FED
00:04:31
cut rates in 2019 stocks went up over
00:04:34
15% in the months leading up to the blip
00:04:37
that we all experienced around the world
00:04:39
and after the fed's emergency rate cut
00:04:41
in 2020 the stock market went up by over
00:04:44
60% and it reached an all-time high
00:04:46
overall though here's a little cheat
00:04:48
sheet for you to reference in case you
00:04:49
forget all of this nerdy information
00:04:51
this shows you data between 1976 to 2023
00:04:55
with International stocks US Stocks
00:04:58
commodities reats bonds and gold and as
00:05:01
you can see when the interest rates are
00:05:03
high that's when bonds typically do okay
00:05:06
but when interest rates go down that's
00:05:08
when the US Stock Market as well as
00:05:10
REITs dominate the rest of the market
00:05:13
the takeaway is that if you like to
00:05:16
invest your money into stocks the effect
00:05:18
of rate Cuts is more complicated than
00:05:21
rates go down stocks go up and certain
00:05:25
stocks perform better than others after
00:05:27
a rate cut according to research from
00:05:29
schwaba again dividend paying sectors
00:05:31
like utilities and real estate tend to
00:05:34
outperform the broader Market in a low
00:05:37
rate environment this is because these
00:05:39
companies typically carry a big amount
00:05:40
of debt and lower rates reduces their
00:05:43
borrowing costs which makes them more
00:05:45
profitable so if you're a dividend
00:05:47
investor which I personally am this is
00:05:49
really good news and lower interest
00:05:51
rates also have a positive effect on
00:05:53
bond prices and I like to think of bonds
00:05:56
as super stable guaranteed return on my
00:05:59
grand paaw like asset and it makes bonds
00:06:02
more expensive because as interest rates
00:06:04
go down bond prices go up now I'm going
00:06:07
to assume that most of us don't invest
00:06:10
in the bond market unless we have a lot
00:06:11
of money or you're protecting your
00:06:12
wealth so that means you're probably not
00:06:14
very busy watching my YouTube channel
00:06:16
but if you are you're probably a retired
00:06:19
Finance nerd so thank you so much for
00:06:20
watching my boring videos but next up I
00:06:23
want to show you what happens to bitcoin
00:06:25
so now that interest rates are going
00:06:27
down I'm super excited to see what
00:06:28
stocks will do depending on who gets
00:06:30
selected and I've been tracking that
00:06:32
information using today's sponsor Mumu
00:06:34
an investment platform that provides
00:06:36
prograde tools data and insights to
00:06:38
investors in the US Canada and Australia
00:06:41
and using the search feature I can look
00:06:42
up either Harris or Trump and it will
00:06:44
show me a list of stocks that could
00:06:45
potentially benefit if either one was
00:06:47
elected but Mumu can also help you find
00:06:49
stocks influenced by the rate cut making
00:06:51
it super easy and another standout
00:06:53
feature is mumu's Cash sweep which right
00:06:55
now offers a market leading 8.1% apy on
00:06:59
uninvested cash for the first 3 months
00:07:02
and then 5.1% after that beating most
00:07:05
mainstream brokerages there's no minimum
00:07:07
deposit or balance requirements and your
00:07:09
cash AC Crews interest automatically
00:07:11
making sure that you maximize your
00:07:12
earnings without any extra effort and
00:07:14
that cash is always available for
00:07:16
trading or withdrawal and if you've ever
00:07:18
been super frustrated like I have
00:07:20
because you're not able to buy and sell
00:07:22
stocks outside of normal trading hours
00:07:24
Mumu allows you to trade up to 16 hours
00:07:27
a day covering both pre-market and post
00:07:29
post Market sessions so you can react to
00:07:31
the news and the market changes in real
00:07:33
time and that means not missing out on
00:07:35
opportunities and finally Mumu offers
00:07:37
commission free trading on US Stocks
00:07:40
ETFs and options with no account
00:07:42
maintenance fees or contract fees for
00:07:44
options and the best part is that right
00:07:46
now Mumu is offering up to 15 free
00:07:49
stocks for new users when you sign up
00:07:51
using my link in the description below
00:07:53
and for my us audience Mumu gives you
00:07:55
the chance to earn up to 15 free stocks
00:07:57
when you sign up just deposit $1,000 and
00:07:59
maintain an average asset balance for 60
00:08:02
days to unlock all 15 free full shares
00:08:05
plus if you transfer money to the app
00:08:07
you'll receive 1.5% cash back on your
00:08:10
initial transfer of up to $300 for my
00:08:12
Australian audience Mumu is chess
00:08:14
sponsored in Australia and offers Cash
00:08:16
Plus which is similar to the cash site
00:08:18
don't forget to click the link below in
00:08:20
the description for full details on the
00:08:21
terms and conditions get your free
00:08:23
stocks thank you Mumu for sponsoring
00:08:25
this segment of the video and now let's
00:08:26
get back to it so the other question I
00:08:28
had is what happens to cryp and Bitcoin
00:08:30
when interest rates go down and I'm
00:08:32
going to show you what I think will
00:08:33
happen in the next 12 months by using
00:08:35
gold as an example gold has already gone
00:08:37
up significantly in 2024 it's up 25% but
00:08:42
let me show you something that's going
00:08:44
to blow your mind because at the start
00:08:46
of 2024 Gold's market cap was about $1
00:08:50
13.8
00:08:52
trillion right now it's roughly 17.5
00:08:56
trillion that's an increase of 3 7
00:09:00
trillion bitcoin's market cap on the
00:09:03
other hand is about 1.1 trillion and
00:09:07
that means this year alone gold went up
00:09:12
3.3 times the entire size of bitcoin's
00:09:16
market cap that's how small Bitcoin
00:09:19
still is now for gold that $3.7 trillion
00:09:23
increase meant that gold went up from
00:09:25
$2,000 an ounce at the start of 2024 to
00:09:29
$2500 an ounce right now in September
00:09:32
2024 a $500 increase which is amazing
00:09:35
but here's the million-dollar question
00:09:37
though do you think Bitcoin could match
00:09:40
the same price performance as gold if
00:09:43
you think it can if you think that
00:09:45
Bitcoin can still experience the same
00:09:47
market cap increase then Bitcoin could
00:09:50
go up by a factor of 3.3x that means
00:09:53
roughly $558,000 a coin that it's at now
00:09:56
to
00:09:57
$174,000 a coin but really it depends on
00:10:00
the fed's monetary policy and what
00:10:02
they'll do going forward for example
00:10:04
when the FED slashed rates to almost
00:10:07
zero in 2020 Bitcoin went up from around
00:10:09
7,000 a coin to over 60,000 by April
00:10:13
2021 but this also around the time if
00:10:15
you remember when institutional money
00:10:17
like micro strategy and Tesla started
00:10:19
adding Bitcoin to the balance sheet
00:10:20
because they wanted something other than
00:10:23
those low yielding bonds that's why
00:10:26
Bitcoin did so well bitcoin's price is
00:10:29
linked to Market liquidity aka the
00:10:32
availability of money and lower interest
00:10:35
rates means the availability of money
00:10:38
increases and micro strategy again is
00:10:41
loading up on more Bitcoin even at these
00:10:43
prices so for a long-term holders and
00:10:46
buyers I think it's really good news but
00:10:48
now the question is what does this mean
00:10:50
for borrowers and Savers now the good
00:10:53
news is if you want to borrow money
00:10:55
Banks should now have a lower interest
00:10:57
rate for loans making easier to buy
00:11:00
homes and cars and to take out loans for
00:11:02
businesses but the bad news is if you've
00:11:05
been enjoying those interest rates on
00:11:07
your savings accounts or CDs that's also
00:11:10
about to change the average interest
00:11:12
rate on a high yield savings account
00:11:14
reached
00:11:15
5.25% in August 2024 but with the FED
00:11:19
cutting rates banks have already lowered
00:11:22
their savings rate historically we have
00:11:25
seen rates Fall by a qu% to a half a%
00:11:29
within a couple weeks of a Fed cut for
00:11:32
example during the last rate cutting
00:11:34
cycle in 2019 the national average
00:11:38
savings rate dropped from 2.2% to just
00:11:42
under 1% in less than 3 months so if you
00:11:46
want to keep your money in a savings
00:11:48
account consider locking in that higher
00:11:50
rate with a longer term CD or look for
00:11:54
those longer maturity dates on the other
00:11:56
hand if you want to borrow money this is
00:11:58
really good news the cost of a 30-year
00:12:01
mortgage rate which hit a 20-year high
00:12:03
of about 8% last year should start to go
00:12:06
down as of September 2024 the average
00:12:10
30-year fixed mortgage rate is 6.2% but
00:12:14
we could see that drop by a quarter to a
00:12:16
half a percent in the coming months if
00:12:19
the FED continues to cut rates for
00:12:22
example after the fed's last rate cut in
00:12:25
2019 mortgage rates dropped by around
00:12:29
75% so 34s over the course of the
00:12:33
following 6 months so if you have a high
00:12:35
interest rate on your home consider
00:12:37
refinancing when the rates start to come
00:12:39
down but remember this is also not just
00:12:42
limited to mortgages if you have a car
00:12:44
loan student loan or even a credit card
00:12:47
rates should also start to come down and
00:12:49
credit cards by the way which are
00:12:51
directly linked to the federal fund
00:12:53
rates saw an average rate drop from 177%
00:12:57
in 2019 to around 14% by mid 2020 after
00:13:02
those rate Cuts either way though
00:13:04
experts say you should never carry a
00:13:06
balance and instead they say you should
00:13:08
transfer to a 0% APR offer and
00:13:11
aggressively pay down your high interest
00:13:13
rate debt now if you made it this far
00:13:14
into the video here's my personal
00:13:16
opinion and how I'm going to invest when
00:13:18
it comes to stocks my gut feeling is
00:13:20
that initially the stock market will go
00:13:23
down and that's because I think the rate
00:13:25
Cuts have already been priced in so I
00:13:27
think it will be a buy the rumor sell
00:13:30
the news kind of thing in the long term
00:13:32
I can't argue with the data that says
00:13:34
over the next 12 months the stock market
00:13:37
goes up in 86% of cases so unless
00:13:40
something happens outside of what we
00:13:42
know about then it should go up and for
00:13:45
Bitcoin I think the next 12 months are
00:13:47
going to be super interesting because
00:13:49
Bitcoin tends to lag behind Gold's
00:13:52
performance so first gold goes up and
00:13:54
then Bitcoin goes up not in all cases
00:13:57
but I think Bitcoin is significantly
00:14:00
undervalued relative to Gold's market
00:14:03
cap so personally here's how I've been
00:14:05
investing I've split my net worth into
00:14:07
four different categories that I'm
00:14:09
somewhat equally invested in 25% in real
00:14:13
estate 25% in Bitcoin 25% in stocks and
00:14:17
25% in cash I'm still buying the S&P 500
00:14:20
via the vti ETF at $100 a day I'm still
00:14:25
reinvesting all of my dividend income
00:14:28
back into my dividends stocks which is
00:14:30
projected to grow to a sizable income in
00:14:32
just a couple decades automatically I
00:14:34
bought quite a bit of Bitcoin because
00:14:36
just like Michael sailor I think in the
00:14:38
long term Bitcoin will outperform
00:14:40
virtually every other asset class
00:14:42
including an especially gold and finally
00:14:44
my rental property is also fully rented
00:14:47
it's going on 2 years now and it's cash
00:14:49
flowing at a 2.5% loan and it helps
00:14:51
lower my taxes but I don't really plan
00:14:53
on buying any more real estate for now
00:14:55
I'd love to hear how you're investing
00:14:56
and what you think will happen to the
00:14:58
market and as always I hope you have a
00:15:00
wonderful rest of your day smash the
00:15:02
like button subscribe if you haven't
00:15:03
already don't forget to grab those free
00:15:05
stocks links are down below go track
00:15:07
them autom magically with a spreadsheet
00:15:08
link Down Below in my patreon thank you
00:15:10
so much for watching this video I'd love
00:15:12
to see you back here next week I'll see
00:15:14
you soon bye-bye