In Friday morning trade, stocks will likely fall slightly. On Wednesday, after the Federal Reserve abruptly hinted at fewer rate cuts in 2025, the major indices fell. ETF holders in Nasdaq (QQQ), the S&P 500 (SPY), the Dow Jones, and the Russell 2000 (IWM) experienced a small loss.
Yesterday, markets initially traded higher but within 30 minutes after the open (10 a.m.), they started to fall. Advancing stocks trailed declining ones. Moreover, the stock market has more companies trading below the simple moving averages of 50 day and 200 days. Weak breadth is an ominous sign of more sell-offs coming.
The combination of at least 25% in Trump tariffs in 2025, inflation, and fewer rate cuts hurts the stock market. It decreases the attractiveness of stocks. U.S. Treasury bonds may become increasingly attractive as investors opt for yield guarantees. Although bond prices increased for all maturities of six months or longer yesterday, yields are now back to the 4.27% – 4.70% range.
The 7-10 Year Treasury ETF (IEF) and 20+ Year (TLT) fell, as the yield ranges increased by 0.25% – 0.50% compared to year-ago levels.
Investors who time the rate cuts right could benefit from trading Treasury bonds. Patient investors may buy the 2 or 3 month treasury to collect the 4.32% yields instead.