One of the traits that top traders have in common: they know how to ride the tide, not fight it. When market events send huge amounts of money from one place to another, you make money by going with the flow, not against it.
Well, another big tide of money is about to hit the stock market.
It’s going to continue the largest investment wave in history…
It will have huge implications for your portfolio…
And it’s coming on November 1.
Here’s how to make sure you’re set to profit…
Europe is Lowering Interest Rates Again
Last Thursday, the European Central Bank (ECB) announced that it is lowering one of its interest rate benchmarks down below zero (-0.50%, to be exact).
In short, European banks must now pay 0.50% for any excess money they keep with the ECB overnight. In other words, banks are now incentivized to loan out all the money they can, even at zero interest rates.
This decision is intended to boost loans and investment and comes after Germany has been showing signs of economic weakness, and concerns about the economic chaos that a no-deal Brexit could bring.
But for us as traders, what’s important is where all this money is going to go.
And the second part of the ECB’s announcement holds the answer…
Quantitative Easing is Back, and Stocks will Profit
See, while the headlines focused on the interest rate cut, the ECB’s announcement had a second, much more important part. Starting November 1, the central bank is going to start spending 20 billion euros (more than $22 billion) a month buying bonds from European banks. You’ll recall from a similar program in the U.S. after the 2008 market crash that this is called quantitative easing. That’s just central bank speak for pouring more liquidity (money) into the system.
That new cash influx has to flow somewhere and there’s really only one way for those investors – and the banks with their extra $22 billion a month – to go. And that’s where money is currently being treated best…
We’ve seen this happen before, in the many rounds of quantitative easing that happened after the 2008 Financial Crisis. The Fed did it, the ECB did it (then and now), and the Bank of Japan (BoJ) has done it. In every single case, new money flowing into the system has sent many billions flowing into the stock market.
After all, stocks offer dividends that can be almost as enticing as bonds, but also offer growth potential.
For traders like us, that means another upswing in the stock market is likely. There’s simply no other place for all this money to go. In the past, some of it went into real estate, and caused the enormous house price booms in Hong Kong, Vancouver, Munich and other cities. But today, these markets are looking unsteady, with fewer and fewer people able to afford the record-high housing prices.
Stocks are the only game left in town. And here in 10-Minute Millionaire, I’ll show you exactly how to use this incoming tide of money to your advantage.
Of course, bonds are still a key part of many portfolios. So let me reassure you, the bond market is not dying – quite the contrary. Even at negative interest rates, countries and large institutions are still buying bonds.
These money managers and institutions don’t do it for the yield, of course, which is negative, but they buy bonds bonds hoping to capture price appreciation because as interest rates drop, bond prices rise.
Despite President Trump’s tweet last week asking for negative interest rates, they are not currently headed to negative territory here in the U.S.
At least let’s hope it doesn’t come to that.
Great Trading and God Bless You,
D.R. Barton, Jr.