{"id":452876,"date":"2017-03-11T13:00:34","date_gmt":"2017-03-11T13:00:34","guid":{"rendered":"http:\/\/juniorminingnews.com\/?p=452876"},"modified":"2017-03-11T13:00:34","modified_gmt":"2017-03-11T13:00:34","slug":"profit-from-the-federal-reserves-ties-to-big-banks-2","status":"publish","type":"post","link":"https:\/\/juniorminingnews.com\/?p=452876","title":{"rendered":"Profit From the Federal Reserve\u2019s Ties to Big Banks"},"content":{"rendered":"
\"federal<\/a><\/div>\n

By Ryan Fitzwater<\/a><\/span> <\/p>\n

<\/div>\n

The Federal Reserve and America’s big banks have a close relationship. Maybe too close.<\/p>\n

This relationship formed more than a century ago. And there’s a not-so-far-fetched conspiracy theory that it formed specifically to serve big banks. (If you really want to take a trip down the rabbit hole, read this.)<\/p>\n

Today’s chart shows that this connection is alive and well.<\/p>\n

Above, we have plotted the S&P U.S. Bank Index and the federal funds upper target rate. As you can see, bank stocks have moved higher as rates have increased.<\/p>\n

Over the last 12 months, U.S. banks have outperformed the S&P by 154.29%.<\/p>\n

This is largely because of two rate hikes in December of both 2015 and 2016. These were the first hikes the Fed had made since 2006, before the financial crisis forced Fed policy to go \u201czero bound.\u201d<\/p>\n

And after the FOMC meeting this coming Wednesday, big bank stocks should run even higher.<\/p>\n

Below, I’ll show you how you can profit from this rising trend. But first, let’s examine why rates should move higher this week.
\nAnother Federal Reserve Bump?
\nThe Fed is holding its infamous Federal Open Market Committee monthly meeting on Wednesday. Fed Chair Janet Yellen and her cronies will decide whether they will jack up rates or leave them be.<\/p>\n

Will they push the interest rate lever up a notch?<\/p>\n

Strong economic data and Trump’s recent speech have pushed the needle toward a rate hike.<\/p>\n

Today, the probability of a March hike is close to 100%. Two weeks ago, it was in the 30% range. So the likelihood of a 25 basis points bump \u2013 from an upper target rate of 0.75% to 1% \u2013 is high. Very high.<\/p>\n

Many believe a March hike is a done deal. A probability close to 100% helps confirm that. Especially after last Friday when Yellen stated, \u201cIn short, we currently judge that it will be appropriate to gradually increase the federal funds rate.\u201d<\/p>\n

Strong language from a person known for vagueness.<\/p>\n

Even if a hike somehow doesn’t come this month, future hikes could spark more rallies in bank stocks. And investors are pricing in possible deregulation in the industry as well. This could save big banks millions in compliance costs. It’s yet another reason bank stocks have been surging higher.<\/p>\n

[iu-adbox]
\nWhy Big Banks Love Rate Hikes
\nThe relationship between the federal funds rate and banks’ profit margins is a correlation every investor must know about.<\/p>\n

The profitability of banks increases every time there is a rate hike. It all has to do with cash.<\/p>\n

Banks hold vast amounts of cash. Think of all the cash you have stashed at your local bank\u2026 hopefully. Customer checking and savings accounts and business deposits make up these big pools of cash.<\/p>\n

Big banks like JPMorgan Chase (NYSE: JPM), Wells Fargo (NYSE: WFC) and Citigroup (NYSE: C) are currently sitting on $23.8 billion, $20.7 billion and $23.0 billion in cash, respectively.<\/p>\n

And when rates move up, the yields banks earn on their cash goes up. This directly boosts their bottom lines.<\/p>\n

It’s all thanks to the \u201cspread\u201d \u2013 the difference between the rate banks \u2026read more<\/a> <\/p>\n

Source:: Investment You<\/a><\/p>\n

The post <\/a>Profit From the Federal Reserve’s Ties to Big Banks<\/a> appeared first on Junior Mining Analyst<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

By Ryan Fitzwater The Federal Reserve and America’s big banks have a close relationship. Maybe too close. This relationship formed more than a century ago. And there’s a not-so-far-fetched conspiracy theory that it formed specifically to serve big banks. (If you really want to take a trip down the rabbit hole, read this.) Today’s chart […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"footnotes":""},"categories":[4],"tags":[],"_links":{"self":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/452876"}],"collection":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=452876"}],"version-history":[{"count":0,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/452876\/revisions"}],"wp:attachment":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=452876"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=452876"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=452876"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}