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How to trade December hike
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Loading...Buying bank shares two months before December's interest rate has been a win-win strategy since 1990. After the strong rise in average hourly wage and the fall in unemployment, the possibility of raising interest rates jumped to 76.7%. This high percentage indicates that the rise in interest rates is almost certain and the market will start trading.
On the chart below, we can see the returns of different sectors since 2004, when the Fed raised interest rates. The graph shows the yield for the period of 44 days before the interest is raised.
Financial assets rise each time and average yields are higher than 10%. The industrial and material sectors are also rising as investors believe the central bank has signaled confidence in the economy.
At the moment, the banking and financial sectors are showing strong growth, and any adjustment can be used to buy assets to make a profit by December, when the Fed is expected to raise interest rates by 0.25% to 1.50%.
Source: Bloomberg Pro Terminal
Jr Trader Petar Milanov
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