Opinions expressed herein are those of Brett Ewing and S. Lance Mitchell and do not represent those of Centaurus Financial, Inc.
Fed Successfully Fools Market Participants into Thinking a Rate Hike May be Coming
- The FED minutes released earlier today point to a great number of participants that think that economic conditions are making it more and more likely there will be a rate hike in June
- The FED continues to prove their adeptness of getting market participants to continue to run from one side of the boat to the other
- We continue to believe there is little to no chance of a rate hike in June & that the FED minutes are akin to knowing you’re being recorded & the need to say something one half the people will agree with while actually doing the thing the other half agrees with
- International risks still abound, with the largest of these being the potential of a Brexit in late June
- The FED will have the Brexit vote which occurs a week after they must make their decision on rates as a fallback on holding the course of gradual hikes
- To be clear, we believe the Brexit to not actually be an issue but just another excuse the FED will use to overshadow the real problem they continue to try and get under control, which is the strength in the US Dollar
- We believe the increased transparency the FED has tried to employ in recent times has actually been a huge negative for the stability of financial markets
- The FED can try and be transparent—but when every word is being hyper-interpreted by different minds it continues to cause financial markets to be extremely volatile & add to the one side of the boat to the other effect
- We believe the best way to play the volatility surrounding the rate decision will be through rate sensitive assets such as mortgage REITs which will undoubtedly selloff due to the minutes
- In the mortgage REIT sector we continue to prefer New Residential Investment Corp (Ticker: NRZ) which will actually benefit in a higher rate environment & American Capital Mortgage Investment Corp (Ticker: MTGE) which prefers lower rates but trades at a significant discount to book
Securities and advisory services offered through Centaurus Financial, Inc., member FINRA and SIPC, a registered investment advisor. Centaurus Financial, Inc. and First Franklin Financial Services are not affiliated companies. This presentation is for educational purposes only and is not intended for investment advice or a solicitation of services.
Brett Ewing and S. Lance Mitchell may own shares of NRZ and MTGE personally and also may manage discretionary accounts which include NRZ and MTGE shares in the portfolio. The views and opinions expressed herein are those of Brett Ewing and S. Lance Mitchell alone and do not reflect the views of Centaurus Financial, Inc., its affiliates, agents or employees. The information set forth herein has been obtained from sources believed to be reliable; however no guarantee is made or implied with respect to its accuracy or completeness, nor does the author recommend that the attached information serve as the basis of any investment decision. This information has been provided solely for informational and educational purposes only and should not be construed as an offer to sell or the solicitation of an offer to buy or sell any securities.
Any equity ideas noted herein are not and should not be construed as a recommendation or rating to buy, hold or sell any security. The information and content herein are subject to change without notice and Centaurus Financial, Inc., its affiliates, subsidiaries, employees, officers, agents or representatives may from time to time have positions or may acquire a direct or indirect beneficial interest in securities mentioned in this communication. As with any investment, the past performance of NRZ and MTGE is not an indication of future performance.