Following the FEDeral reserve - or FED - lead on interest rate policy and economic forecasts growth projections has actually accurately predicted market tops & bottoms since the great financial crisis nearly 14 years ago. On today’s video I’m going to show you that timing the bottom in today’s market could be as simple as waiting for the Fed to pivot. Again. For more than a decade the federal reserve has maintained historically low interest rates & has engaged in a practice known as quantitative easing. Knowing the plumbing of how quantitative easing - or QE - actually works is less important than knowing the result of it. Real asset prices tend to go up because the alternative like a bond or simply saving money in a bank account earns almost zero interest. And it’s worked. Over the past 14 years, everything from real estate to baseball cards - and certainly stock prices have soared. When the FED has pulled QE away from the markets they go down. In late 2015 the Federal Reserve indicated they’ll gradually start raising interest rates … but it wasn’t until a few years later in 2018 when they really got serious - raising the benchmark interest rate 4 times in one year. Well, the stock market didn’t like that - and stocks fell 20% in less than 3 months in 2018 - leading to the now infamous “Powell Pivot” Instead of raising interest rates in 2019 as planned - the Federal Reserve decided to actually cut rates that year - and stocks loved that. In January 2019 the S&P500 index rose 25%. Stocks continued to feed on the low interest rates and peaked in February 2020 - when of course COVID-19 reached the shores of the United States. Despite the global pandemic, governments around the world were making it rain tax payer money handing out stimulus checks and loans to businesses - that were mostly forgiven. The S&P500 rocketed higher - and with good reason. There was more free & cheap money floating around the system than ever before. The combination of all those stimulus checks and ongoing supply constraints caused consumer prices to start rising rapidly. Consumer prices were steadily rising in 2020 and rose to more historically high levels in 2021. the Federal Reserve infamously refereed to the high inflation as “transitory” or temporary because of supply chain bottle necks and the economy re-opening with pent up demand. The inflation was supposed to go away, but it didn’t. In fact, it was only getting worse. That caused the Federal Reserve to pivot. Instead of keeping the easy money parting going, JayPow was going to break this party up. Just like in 2018 - Jerome Powell indicated the Federal Reserve would need to raise interest rates and end quantitative easing - this time to slow inflation. And the S&P500 in 2022, just like in 2018, doesn’t like that. Since the FED’s annoucement higher rates are coming & QE is ending, the index is down over 15%. There’s clearly a correlation between low interest rates and high stock prices. There’s also correlation between market tops & bottoms when the FED starts & ends rate cycles. When is the FED going to give up raising interest rates. Well we know the fed is raising interest rates now to control inflation. Obviously when the Consumer Price Index - or CPI - starts to trend down … the odds get better the FED is about to pivot. I would assume stocks will move before the FED actually pivots since the CPI data is announced monthly. But keep in mind - the FED could error to the cautious side - waiting for months, if not years of consistently low inflation before they change policy. The other indicator the FED closely watches in the unemployment rate. Right now, unemployment is historically low. However, we’re starting to see antidotal evidence, combined with actual forecasts from major companies that layoffs might begin. During earnings calls recently, Amazon, eBay, Etsy, and Shopify indicated that sales for upcoming quarters were going to be lower than previously anticipated. Amazon delivery partners have laid off thousands of drivers and the company is reducing its staff and costs because of slowing demand. The combination of high inflation & now rising interest rates is slowing demand. This slowdown should cause inflation to go back down - and may cause unemployment to go up. Low inflation & unemployment going higher would cause Jerome Powell to pivot again. If inflation retreats quickly, the FEDs interest rate policy is still historically low - meaning the FED might not have to pivot back to QE to have an easy monetary policy. That’s the “soft landing” that Powell hopes to achieve. One thing is for sure. You don’t want to fight the fed as stocks are going up or down. Right now the FED is trying to slow down the economy and until they signal a change in policy, it’s safe to assume the direction of the stock market will continue to go lower.