The Great Income Heist Is Coming – Here’s What to Do Now
I want to warn you now that you may be about to make less money.
If you have money in interest-bearing accounts, that juicy return you’ve enjoyed is about to decrease. And a lot of folks may not even realize it.
Even more importantly, they may not realize the account itself may no longer be a good place for your hard-earned money.
The Great Income Heist is coming, and record dollar amounts are about to take a hit.
Now is the time to make sure you’re not a victim… a double victim really.
A victim of lower returns, and a victim of missed opportunities in what happens as a result.
Your Returns Could Fall 20%
The potential impact of lower interest rates is staggering.
Start with the amount of money we’re talking about – a record $6.44 trillion just in money market funds. That number has increased seven consecutive quarters, going back to third quarter of 2022.
By that point, the Federal Reserve had raised rates five times and three full percentage points – from nearly 0% to just over 3%.
Rate hikes continued through last July, and all that cash sitting is doing okay as those funds generally pay just over 5% today. That’s not as good as stocks – it never is. The S&P 500 is up 20% since the last rate hike on July 26, 2023 – but it’s not bad for a mostly risk-free investment.
Mostly risk-free. There is one major risk, which is lower interest rates. And while that’s been a long time coming, we are now closer than ever.
Investors currently assign a 10.3% chance of a cut at the Fed’s next meeting on July 31. That jumps to a 61.1% chance of a cut at the following meeting on Sept. 18. And that probability increased Friday when the latest data showed inflation slowing to its lowest annual rate in more than three years.
Source: CME FedWatch Tool
Investors also anticipate another cut at the December meeting.
Assuming two quarter-point cuts (25 basis points each) by the end of the year, the return on cash sitting in money market funds almost certainly dips from around 5% to 4.5% or so.
That may not look dramatic, but it’s a 20% income heist… with that heist is likely to expand in 2025. Name any other investment where you would be satisfied making 20% less than you were before.
Higher rates caused stocks to stumble in 2022. The crowd sold stocks and hid in money markets.
We’re about to see a complete flipflop of that – a seismic shift back into stocks as that mountain of cash – that enormous cash bubble – flows into stocks seeking bigger profits.
Let’s say not even half of that cash bubble goes into stocks. Say $2.5 trillion does. That would bring the total in money market funds back to pre-Covid levels around $4 trillion.
The entire U.S. stock market is worth roughly $50 trillion, so that would be 5% of the market’s total value flowing into stocks. That’s significant – and highly bullish! (And that doesn’t even include cash in savings accounts, CDs, etc.)
That’s enough juice for even low-quality stocks to benefit, but you and I both know the highest-quality stocks always outperform in the end.
Get Ready Now to Ride the Coming Wave
Waiting for that first rate cut would be a mistake. Cash will start to be redeployed into stocks before the Fed officially cuts rates.
That mountain of cash is jet fuel for a shot higher, and when stocks start to move, FOMO (“fear of missing out”) will kick in and the crowd will follow. More cash will fly off the sidelines.
We’ve already seen stocks move at even a hint the Fed is considering rate cuts.
The window is now open for investors to not only avoid getting hit with smaller returns in The Great Income Heist, but also get in position to earn much bigger profits in that wave of cash flowing into stocks.
And the best way to ride that profit wave is in the absolute best stocks in the market. These are the top-ranked stocks in my Quantum Edge system with muscular fundamentals (a great business), strong technicals (positive price action), and Big Money flowing in from hedge funds and institutions (the money that moves stocks).
I’m talking about stocks like Arista Networks (ANET), which has surged 115% in less than a year in our TradeSmith Investment Report portfolio. It is the epitome of strength with its overall Quantum Score at 91.4 and both the fundamentals and technicals also scoring above 90.
Source: TradeSmith Finance
ANET is above our buy limit and may even be a little overextended at the moment, but it remains one of the highest-rated stocks in my system with powerful data pointing to higher prices over time.
These are the kinds of stocks you want to own before the Great Income Heist bandits show up. And before all that money flies back into the stock market.
Talk soon,
Jason Bodner
Editor, Jason Bodner’s Power Trends
P.S. You don’t even have to be a genius to know what’s coming. But if you get ready now, you’ll sure look like one. Click here to get started.