​Election weeks are notorious for volatility. Investors often hedge their bets with options, causing the Volatility Index (VIX) to spike. But here’s the kicker: this heightened volatility typically peaks around election day and starts to calm as results become clear. For new investors, remember that these swings are normal – they’re part of the market’s reaction to uncertainty.

​Historically, the stock market often experiences a “relief rally” post-election. Once the results are clear, markets breathe a sigh of relief and tend to rally in the following months. For example, small-cap stocks often see stronger returns post-election, sometimes hitting 20% gains in the year after a presidential election.

​Some investors may expect stocks to perform better under a particular party. Republican victories are traditionally associated with business-friendly policies, while Democratic wins may raise concerns about taxes or regulation. However, history shows that markets have delivered strong performances under both parties. Democratic administrations often see growth in tech and infrastructure, while Republican administrations might favor energy and financial deregulation.

​With Trump vs. Harris, 2024 could be a particularly dynamic year for the markets. Trump’s potential return may boost sectors like energy and defense, while Harris could drive growth in clean energy and infrastructure. However, remember that markets tend to price in expectations well before election day, so any immediate impact might not be as pronounced as expected.

​Platforms like X (formerly Twitter) are buzzing with predictions and opinions, from a potential “Trump Bump” in certain sectors to optimism around Harris’s focus on tech and infrastructure. This sentiment can influence investor psychology, though the actual market often behaves unpredictably. It’s wise to tune out the noise and focus on fundamentals.

When both the Sahm Rule is triggered and the yield curve has recently un-inverted, it significantly increases the probability of an ongoing or imminent recession.
The normalization of the 2-year and 10-year Treasury yield curve, where it's no longer inverted, typically signals a shift in economic expectations.
 
Historically, this un-inversion has often preceded economic downturns, contrary to what one might intuitively expect. It may indicate that investors anticipate lower short-term interest rates in the near future, possibly due to expected central bank actions to combat slowing economic growth.
 
While this signal has been a reliable recession predictor in the past, its accuracy in the current economic environment is debated due to unprecedented monetary policies and global economic factors. Markets may react with increased volatility as investors reassess their positions. However, the timing between yield curve normalization and potential economic changes can vary significantly, and other economic indicators should be considered for a more comprehensive outlook.
Here's what this might historically indicate and what could be expected:

• Historical Indication: An un-inverted or steepening yield curve after a period of inversion has often been associated with an increased risk of recession. This might seem counterintuitive because one might expect the opposite, but the reasoning lies in the dynamics of interest rates and economic cycles.
  
  
• Economic Expectations:
  • Interest Rates: The un-inversion could suggest that short-term rates are expected to fall relative to long-term rates, which might indicate that the market anticipates the central bank will lower short-term rates to combat an economic downturn.
    
    
  • Economic Growth: Investors might be pricing in slower economic growth or a recession, where they demand higher yields for longer-term securities due to increased risk perception or lower inflation expectations over the long term.
    
    
• Timing and Expectations:
  • Recession Timing: If history is any guide, the un-inversion might suggest that if a recession hasn't already started, it could be imminent. However, the lag between an un-inverted yield curve and an actual recession can vary.
    
    
  • Market Reaction: Stock markets might react negatively to an un-inverting yield curve if investors believe a recession is on the horizon.
    
    
• Current Context: Given the unique economic environment, the yield curve's predictive power might be under scrutiny. Recent analyses suggest that while the yield curve's inversion has historically been a reliable indicator, its un-inversion might not carry the same weight due to changes in how banks operate, the nature of economic cycles, or the impact of quantitative easing and other unconventional monetary policies.
  
  
• Predictive Power: While the yield curve has been a reliable predictor historically, its accuracy has been questioned in recent years due to unprecedented monetary policies.
  
  
• Global Context: International economic conditions and policies might influence U.S. Treasury yields and economic outcomes, adding complexity to the interpretation of yield curve movements.
  
  
• Policy Response: Potential policy responses from central banks and governments could significantly influence the economic trajectory following yield curve normalization.

• Market Sectors: Different market sectors might react differently to the yield curve normalization, as some industries tend to be more sensitive to interest rate changes than others.
  
  
• Inflation Expectations: Changing inflation expectations play a crucial role in yield curve dynamics and subsequent economic outcomes.
  
  
• Structural Changes: Potential structural changes in the economy (e.g., technological advancements, demographic shifts) could affect the relationship between yield curve movements and economic outcomes.
  
  
• Timing Uncertainty: There is significant uncertainty in timing between yield curve changes and economic events, especially given the unique current economic environment.
  
  
• Financial System Stability: The health and stability of the financial system might influence the impact of yield curve changes on the broader economy.
  
  
• International Capital Flows: Changes in international capital flows might affect Treasury yields and complicate the interpretation of yield curve movements.
  
  
• Sahm Rule and Recession Probability: The Sahm Rule, which identifies the onset of recessions based on changes in the unemployment rate, provides an additional perspective when coupled with the un-inverted yield curve:
  
  • The Sahm Rule states that a recession has likely begun when the three-month moving average of the national unemployment rate rises by 0.50 percentage points or more relative to its low during the previous 12 months.
    
    
  • When both the Sahm Rule is triggered and the yield curve has recently un-inverted, it significantly increases the probability of an ongoing or imminent recession.
    
    
  • The combination of these indicators provides a more robust signal, as it incorporates both financial market expectations (yield curve) and real economic data (unemployment rate).
    
    
  • However, it's important to note that even this combined signal is not infallible, and economic conditions can still deviate from historical patterns.
    
    
• What Might Happen:
  ​
  • Short Term: There might be a period of uncertainty or volatility in financial markets as investors adjust their portfolios in anticipation of lower growth or a recessionary environment.
    
    
  • Long Term: If a recession does follow, it might lead to lower interest rates, potentially stimulating economic activity through cheaper borrowing costs, assuming other factors like consumer confidence and employment don't deteriorate significantly.

​You have been warned! The bond market is sending strong signals that a recession is on the horizon, but the real trouble may not be during the current yield curve inversion—it’ll likely come after the curve corrects itself. The difference between the yields on 2-year and 10-year Treasury notes has been inverted, a highly reliable indicator of bloody recessions. However, as this inversion begins to right itself, the risk of an economic downturn increases.


 
Understanding the Yield Curve De-Inversion 

When the yield curve is inverted, short-term interest rates are higher than long-term rates, reflecting investor pessimism about the near future. But history shows that the most severe economic downturns often occur after the yield curve de-inverts. This process, known as yield curve steepening, indicates that long-term rates are rising again, which can signal that the economy is transitioning from a phase of uncertainty into a recession.
 


Why De-Inversion Signals Trouble 

The de-inversion of the yield curve is often misunderstood. While some might view it as a return to normalcy, it typically heralds the beginning of the recession that the initial inversion predicted. As the curve steepens, it suggests that the market is anticipating economic weakness, forcing long-term rates higher as investors demand more compensation for the growing risks.


In other words, it’s like seeing storm clouds begin to break after a long period of overcast skies. While it might seem like the weather is improving, those clear skies actually signal the arrival of a severe storm, not the end of one. The break in the clouds is just the calm before the storm hits in full force.

 
Conclusion 

The bond market’s current inversion is a clear sign of looming economic challenges, but the real danger lies ahead when the curve begins to steepen and de-invert. This phase has historically been followed by severe economic downturns, suggesting that the most significant risks are yet to come. Investors and policymakers must remain vigilant as this indicator progresses, understanding that the de-inversion phase could mark the beginning of the next recession.

You have been warned. 

​Learn more at FreeOnlineTradingEducation.

​Des Woodruff of GrokCor

The US economy is showing signs of potential weakness, with several indicators pointing towards a possible recession. Here's a summary of the current state of the US economy:

1. Purchasing Managers' Index (PMI): The S&P Global US Manufacturing PMI was 49.8 in June 2023, indicating a slight contraction in the manufacturing sector. This could signal a slowdown in economic activity.
   
   
2. Leading Economic Index (LEI): The Conference Board's Leading Economic Index for the US declined by 0.7% in May 2023, marking the tenth consecutive month of decline. This is a significant indicator of a potential recession.
   
   
3. Consumer Confidence Index: The Conference Board's Consumer Confidence Index decreased to 106.4 in June 2023 from 108.7 in May. This suggests a decline in consumer confidence, which could impact spending and economic growth.
   
   
4. Initial Jobless Claims: Initial claims for unemployment insurance benefits have remained relatively low, with 235,000 claims reported for the week ending July 15, 2023. However, this is an increase from the previous week, which saw 230,000 claims.
   
   
5. Housing Starts and Building Permits: Housing starts fell 8.0% in June 2023, while building permits decreased 3.7%. This suggests a slowdown in the housing market.
   
   
6. Corporate Profit Margins: Corporate profit margins have remained relatively stable, but there are concerns about rising costs and inflation impacting future profits.
   
   
7. Credit Spreads: Credit spreads have widened slightly, indicating increased risk in the corporate bond market.
   
   
8. Stock Market Performance: The S&P 500 has experienced volatility, with a decline of 0.2% over the past month. The VIX, a measure of market volatility, has jumped up considerably in recent days.
   
   
9. Retail Sales: Retail sales increased by 0.2% in June 2023, suggesting continued consumer spending.
   
   
10. Industrial Production: Industrial production decreased by 0.5% in June 2023, indicating a contraction in the manufacturing sector.
    
    

The inverted yield curve, which has historically been a good recession predictor, has been inverted for an unusually long period without a recession materializing. The Sahm Rule, another recession indicator, is currently signaling a recession based on the unemployment rate. The VIX, which has jumped up considerably in recent days, along with the markets selling off from recent highs on growing trading volume, could signal increased market volatility and uncertainty.

Despite these concerns, the stock market has remained resilient, with the S&P 500 up double digits. However, bank credit growth is near 0%, and credit card debt is soaring. The Federal Reserve has raised interest rates multiple times in an attempt to control inflation, which could further impact the economy.

While there are signs of economic slowdown, the overall consensus is that the Fed will have to cut rates in the coming years as inflation comes down. However, the economy is not slowing down as much as expected, and the unemployment rate remains relatively low.

In conclusion, while there are risks of a recession, the US economy has shown remarkable resilience over the past couple of years. It remains to be seen whether the economy will achieve a soft landing or if a recession is on the horizon. However, economist predict that there is a 50-70% we are heading into a economic recession. The indicators above support this. 

Des W Woodruff
linkedin.com/in/deswoodruff

No matter how strong your trading plan is or how disciplined your trading approach, it all falls short if you're trading the wrong stocks. Picking the right stocks is crucial in intraday trading and involves several key considerations:

• Industry and Sector Volatility: Some industries and sectors are more volatile than others, offering more opportunities for intraday trading. Understanding sector-specific trends and how they interact with broader market movements is important.

 

• Company News and Earnings Reports: Keeping track of company-specific news, including earnings reports, regulatory changes, or leadership shifts, can provide valuable insights into potential stock movements. Stocks reacting to a news catalyst can provide exceptional price movement and ample opportunity to profit.
  
  
• Trading Volume: Stocks with high trading volume generally provide better opportunities for intraday trading due to tighter spreads and better liquidity.

Most day traders utilize an intraday stock scanner (also referred to as an intraday stock screener) to find stocks that fit their specified trading criteria. For example, chart pattern traders are likely to use a stock scanner to find stocks that have higher than average trading volume (i.e. Relative Volume) and that are over a specific price. From that scan, they'll create a watchlist or hotlist of stocks from which they will look for intraday chart patterns. 

Developing an intraday trading strategy is crucial as it provides a structured approach to navigating the fast-paced and often volatile day trading market. A well-defined strategy helps traders make informed decisions, manage risks effectively, and capitalize on short-term market movements. Continuous refinement of this strategy is key to adapting to ever-changing market conditions, enhancing the potential for profitability and minimizing unnecessary losses. Developing a robust strategy requires:

• Backtesting and Simulation: Before implementing a strategy in the live market, testing it against historical data can help identify potential flaws and areas for improvement.

 

• Emotional and Mental Discipline: Successful intraday trading relies not just on technical skills but also on psychological resilience. Developing a mindset that remains calm and objective under pressure is key. Even the most distinguished traders deal with emotional/psychological battles when money is on the line, but most of those problems can be handled when you have a trading plan that stacks the odds in your favor over time. Our 301 Trading mentorship is one way to attain such a plan.
  ​
  
• Adaptive Approach: The market is always changing, and strategies that worked yesterday may not work tomorrow. Continuous learning and adaptation are essential.

​For experienced traders looking to enhance their approach consider the following:

• Algorithmic Trading Systems: More advanced traders might consider building or using existing algorithmic trading systems that can automatically execute trades based on predetermined criteria.

 

• Risk Diversification: Implementing strategies that spread risk across different instruments or markets can help mitigate potential losses.
  
  
• Continuous Education: The world of trading is complex and ever-evolving. Engaging in ongoing education through courses, webinars, and trading communities is vital to stay ahead.​

In the tempestuous realm of trading, a trader's only reliable anchor is a proven, time-tested, rules-based trading plan. Perhaps this sounds like a 'no duh' statement, but it warrants emphasis. Think about it– what do quant funds (algorithmically traded hedge funds) do? At their core, their algorithms adhere to a strict set of predetermined rules to achieve profitability over time. A trading plan aims to do the exact same. While no strategy offers absolute predictability or guaranteed returns, a well-crafted, rules-driven trading plan that's crafted with the guidance of an experienced trading mentor tips the balance in your favor. Removing the guesswork from trading, this plan enables you to navigate confidently through the usual market volatility as well as the rare Black Swan events. The law of averages will eventually work in your favor if you follow such a trading plan with unwavering commitment. The only question is...are you up for it?

After having personally mentored thousands of traders, I cannot emphasize enough the need for traders to have a solid trading education. If you’re considering taking up trading as a side income or full-time income, consider taking our free 101 trading course. It’s a simple yet highly informative six video series that will give you a solid trading foundation and will serve as your starting point on the path to profitable trading. Take my word for it when I tell you that the markets are no place for the uneducated...they will chew you up and spit you out (financially AND emotionally) if you don't know what you're doing. That said, they can be pleasantly rewarding when approached with the right strategy.

I highly recommend jumping in to the 101 courses (they're free anyway!) today. Go here:

https://www.freeonlinetradingeducation.com/sample-101-video.html

-Des Woodruff (aka d-seven)
​Grok Trade

There's an exciting development stirring in the crypto-sphere. BlackRock, a name you might recognize as the world's largest asset manager (trillions in management), is making a strategic play into Bitcoin. They've filed for a unique beast - the first publicly traded spot Bitcoin ETF in the United States, dubbed the "iShares Bitcoin Trust."


So, let's talk about what a "Spot Bitcoin ETF" is. In essence, a Spot Bitcoin ETF is an Exchange-Traded Fund that mirrors the real-time price, or "spot price," of Bitcoin. What this means is when you invest in such an ETF, you're indirectly purchasing Bitcoin, without the need to manage the nitty-gritty of digital asset ownership (i.e., securing a digital asset exchange and setting up a digital wallet).
This is in contrast to a futures-based Bitcoin ETF, like Grayscales GBTC, which tracks the price of Bitcoin futures contracts rather than the actual asset itself. When investors purchase shares in a spot Bitcoin ETF, they are buying into a fund that directly holds Bitcoin, allowing them to get exposure to the digital asset without having to buy, store, or manage it themselves.


Let's look at why BlackRock's move could be a game-changer. The iShares Bitcoin Trust is designed to address the concerns that have led to the SEC turning down similar ETFs in the past. Their strategy involves a "surveillance-sharing agreement" with exchanges, with the likes of Nasdaq and a spot trading platform for Bitcoin in the mix. The goal is to share information about trading activities, clearing, and customer identities, aiming to tackle the issue of market manipulation.


Now let's answer three burning questions you might have:

1. When will the SEC decide on BlackRock's spot Bitcoin ETF?
Unfortunately, there's no set date for a decision. These processes can take quite some time, even several months, and there could be extensions or delays. So, all we can do is wait and watch.


2. What could be the impact of a spot Bitcoin ETF on the Bitcoin market?
If the ETF gets the green light, it could significantly shake up the Bitcoin market. It offers a seemingly safer and more regulated way for investors to dabble with Bitcoin, which could draw more institutional and individual investors. This could potentially push demand and Bitcoin's price upward. But keep in mind: market movements are unpredictable and influenced by various factors, so proceed with caution.


3. What are the risks associated with a spot Bitcoin ETF?
As with any investment, a spot Bitcoin ETF comes with risks. Its value is tied to Bitcoin's price, which is well-known for being volatile. Regulatory uncertainty around cryptocurrencies adds another layer of risk. Also, the ETF's value depends on the security measures in place by the Bitcoin custodian—in this case, Coinbase Custody Trust Co. Any breach there could have repercussions for the ETF. And of course, there's the usual lineup of risks associated with any ETF, such as liquidity and market risk. As always, it's vital to do your homework and consider your risk tolerance before diving in.


Last thought
At the moment, we're witnessing a high-stakes drama unfolding across the U.S. financial arena. Pivotal events are taking center stage, including the request by BlackRock, the world's leading asset manager, to initiate a spot Bitcoin ETF, and the simmering speculation regarding the proposed U.S. Central Bank Digital Currency (CBDC). Yet, these are merely a piece of the larger picture.


Here's the scenario. BlackRock, a behemoth in the asset management realm, is treading into unexplored waters with its recent appeal for a spot Bitcoin ETF. While this groundbreaking move could alter the future of Bitcoin investment, it sharply contrasts with the stringent approach that the SEC is adopting towards cryptocurrency platforms like Coinbase and Binance.US.


This brings us to the crucial puzzle piece - 'Operation Chokepoint 2.0'. It's a term being whispered across the industry, representing what many view as an intentional effort by federal authorities to isolate the cryptocurrency industry from essential banking services. This crackdown raises significant questions about what the future holds for digital currencies in the U.S.


In the midst of this unfolding narrative, Florida's Governor DeSantis has thrown another twist in the works, choosing to prohibit CBDCs within his state boundaries this year, helping safeguard freedoms. This bold move adds an intriguing twist to the tale, as it creates an additional layer of discord between state and federal stances on digital currencies.


To sum it up, we are at the crossroads of a gripping period for digital currency within the United States. We're witnessing an emerging clash between the embrace of digital assets by traditional financial institutions, stringent regulatory actions, the ominous 'Operation Chokepoint 2.0', and the resistance against a potential CBDC by some states. The outcomes of these power plays could profoundly impact the future of cryptocurrency, not just within the U.S., but worldwide. For now, we wait holding our breath to see how the drama unfolds.


Remember, investing is a journey. Take it one step at a time.
Des Woodruff (aka d-seven)
GrokTrade


*This article is intended for informational purposes only. It is not intended to be financial or investment advice.*

What is a CBDC and why should we care?
You have heard of cryptocurrency (think Bitcoin, Ethereum, etc.). Well, the US Central Bank Digital Currency, or CBDC for short, would be a digital version of the US Dollar (USD). In other words, the USD would become a government issued "cryptocurrency." In this case, the Federal Reserve, the guys who control our money, would issue and control a digital form of the US dollar. It would be sizably different from, say, a decentralized Bitcoin, or other cryptocurrencies since a US CBDC would be backed by our government. The goal would be to get the best of both worlds, the convenience of digital money and the stability of traditional cash.
 
The Good
The concept of a digital US dollar is certainly intriguing. In the era where rapid transactions are the expectation, a digital currency has the potential to transform how we manage our finances. The ability to expedite transactions at a faster rate could be a game-changer for both individuals and businesses, not just domestically but internationally as well. A more rapid, digital form of the US dollar could strengthen its standing on the global stage, maintaining its status as a world reserve currency. As more transactions move online, having a digital dollar keeps the US current and relevant, allowing the currency to adapt to the changing landscape of global finance helping secure its world reserve status.
 
Furthermore, a digital dollar could potentially foster financial inclusivity. It's a currency form that doesn't require a traditional bank, offering financial services to those who are currently unbanked. This could lead to greater economic equality. Moreover, it might make government benefit distribution more efficient and direct, possibly reducing instances of fraud.
 
However, it's important to keep in mind some potential roadblocks. For instance, Federal Reserve Board Governor Michelle Bowman has expressed concerns about the effectiveness of digital currencies in solving issues of financial exclusion. Barriers like limited internet access or lack of mobile devices would be a real problem.
 
The Bad
As promising as a digital dollar may seem, the associated challenges and risks should not be taken lightly.

The idea of a digital US dollar might seem like the logical "next step," but there's one significantly scary downside to consider - a potential hit to our personal freedoms. This is a significant issue. Think about it this way-- the government would have an even bigger microscope on our money. In fact, we've seen something like this already.

Do you remember in early 2022 when Canadian Prime Minister Justin Trudeau made the decision to stop payments to striking truckers? This is an alarming example of government overreach. The move, which disrupted the financial support of individuals exercising their right to strike, led to questions about the limits of governmental authority versus individual rights. This incident sparked fears of a future where personal financial transactions could be controlled or halted by the government under specific circumstances.

So, imagine if something like that happened here in the US, but on an even larger scale. With a digital dollar, the government could keep tabs on our transactions and, technically speaking, have the power to turn off our money tap—for any reason (e.g., political, religious, etc.). That's a serious concern, and it raises big questions about how much control we're willing to hand over in return for the convenience of a digital dollar.
 
Another one of the most pressing concerns is the potential for financial instability. If people all at once converted their savings to digital dollars during a crisis, it could create a similar situation to a bank run, and thereby weaken the banking system.

Privacy and cybersecurity concerns also loom in a big way. Digital systems also come with an increased risk of cyberattacks, and a breach in a digital dollar system could potentially compromise a vast amount of financial data.

And, as mentioned prior, privacy issues arise from the increased visibility of transaction data that digital dollars would enable, as it could potentially allow the government or other entities to track individuals' financial activities more closely than is currently possible. So, striking a balance between leveraging the potential benefits and mitigating the associated risks of a digital US dollar requires careful thought and prudent management.
 
How far are we from a Digital US Dollar?
The short answer? It's hard to say. The creation of a CBDC, or a digital US dollar, is contingent on multiple aspects, encompassing technical viability, policy directives, regulatory frameworks, and the overall societal preparedness for such a transformation. Each of these is a major hurdle to cross.

The big dogs at the US Federal Reserve are teaming up with the brainiacs at MIT to build the tech needed for a possible digital dollar. The Fed's head, Jerome Powell, is big on taking it slow and doing things right, rather than rushing to get it out there, which is music to my ears.
 
At the same time, there's this group called the Digital Dollar Project, backed by Accenture and the Digital Dollar Foundation, that went public in 2021 about running five pilot programs to test out how a US digital currency could work. Plus, President Joe Biden dropped an executive order looking into whether a US digital currency makes sense for our country. The government's adversarial role against crypto banks and exchanges (i.e., ChokePoint 2.0) tell me that the US has already made up its mind and will have a CBDC. It's coming.
 
Now, don't hold your breath for a launch date for this digital buck, because the studies and pilot programs are still in full swing. But one thing's for sure - if a digital currency does happen in a big economy like ours, it's going to take a few years to roll out once we decide to hit the gas.
 
What are the potential implications for the stock market?
The introduction of a digital US dollar could have a significant impact on the stock market and the trading community. Here's a look at some potential effects based on the limited information provided in the resources.

1. Faster and More Efficient Transactions: With the introduction of a digital dollar, transactions could become faster and more efficient. Digital assets presumably will be used at some point to purchase securities. This could enhance trading efficiency and liquidity in the stock market. Faster transactions could lead to higher trading volumes and could change trading strategies as the time required to settle transactions decreases.
   
   
2. Increased Market Access: A digital dollar could provide increased access to the stock market for individuals who currently don't have access to traditional banking services. It may also make it easier for international investors to invest in US stocks, potentially increasing demand and possibly boosting stock prices.
   
   
3. Regulatory Changes: A digital US dollar may necessitate new regulatory measures to govern its use within the financial markets. These regulations could impact how trades are made, potentially affecting trading strategies and the overall operation of the stock market.
   
   
4. Volatility: The introduction of a digital US dollar may initially lead to increased market volatility as traders adjust to the new form of currency. The stock market often reacts to uncertainty with increased volatility, and a significant change like the introduction of a CBDC could certainly generate such uncertainty.
   
   
5. Potential for New Financial Products: The introduction of a digital dollar could lead to the creation of new financial products and trading instruments based on this digital currency. These could provide more opportunities for traders and investors but could also increase complexity within the financial markets.
   
   

             NOTE: These points above are merely theoretical as there's limited concrete information in on the topic.
 
Conclusion
The digital US dollar is a thrilling idea, isn't it? Imagine zippy transactions, greater financial inclusivity, and a stronger global position for our currency - exciting stuff! But let's not forget, there could be a flip side.
 
The big concern is the potential for Big Brother watching our financial transactions even closer. Losing our freedom is a major issue. That level of government control is not good any way you slice it.
 
We've also got concerns about destabilizing the banking system, increased risk of cyberattacks, and privacy issues. While we're moving forward, it's crucial we strike a balance between the exhilarating advancements and potential risks.
 
As for when we'll see a digital dollar, well, there's still a long road ahead. With the Fed, MIT, and others working on it, it seems like we're on track. But let's take it slow and get it right - we're in no rush to give up our freedoms for a faster—more modernized dollar.

​Des Woodruff
​[email protected]

Well, it’s 2023, and it appears we have a lot more market downside to endure.

If you’re keeping a close eye on the stock market, you may have heard the term “yield curve inversion” being tossed around lately. But what exactly does it mean, and why does it matter?

A yield curve is like a line graph that shows how much interest you would earn if you invested in different types of bonds with different maturities. Long-term bonds, such as 10-year bonds, typically pay higher interest rates than short-term bonds, such as 2-year bonds, to compensate investors for tying up their money for a longer period.
​
A yield curve inversion happens when this relationship is flipped, and the interest rates on long-term bonds, such as the 10-year bond, become lower than those on short-term bonds. This means that investors are more worried about the short-term economic outlook and are willing to accept lower returns on longer-term bonds to protect their money from potential losses in the future.

The inversion of the yield curve is seen as a warning sign of a highly potential economic downturn, as it suggests that investors are pessimistic about the future and are seeking safer investments.
This is a significant indicator of a likely economic downturn. In fact, every time this inversion has occurred since 1980, it has been followed by a recession, making it a reliable predictor of an economic downturn.

However, it’s important to note that the timing and duration of these recessions can vary. For example, the recession that followed the 2006 yield curve inversion was not immediate and lasted from December 2007 to June 2009.

IMPORTANT: See the chart below. Each vertical red line indicates the end of a bond-yield inversion. Anytime this occurs, a recession always follows. The effect on the market is severe. Historical data shows the average market drop during the past six inversion crashes was a whopping -28.4% for the S&P and -40.4% for the Nasdaq. This can be a scary prospect for investors, especially those who are new to the stock market or who may not have experienced a major multi-year market dip.

Tradingview chart: The teal line is the SPX (S&P-500) price and the thin blue line is the bond yield curve between the 10-year and 2-year bonds. Anytime the bond yield curve line dips below the thick red horizontal lines, a rare bond yield inversion occurs and should be noted.
 
We’re currently in a historically deep bond yield inversion. The real concern is when the inversion comes to an end. The bond yield curve has turned upward and heading towards ending the inversion. The question is how long it will take for the recession to sink in thereafter and for the markets to take their next leg downward.

Our estimate is that the drop could start as early at Q4 of 2023 or could hold off to Q1 or even Q2 of 2024.

Regardless, another 30-40% market drop, and the expected double-digit unemployment will be a shock to the economic system.

It’s important to remember that there are ways to potentially mitigate risk during times of market turbulence. For example, some investors may choose to diversify their portfolios or invest in sectors that tend to be less affected by economic downturns.

Another strategy is to learn how to trade the markets effectively. While trading the markets carries risk, having a solid understanding of how they work and knowing how to read market trends can potentially help investors make more informed decisions and minimize their risk.

The Tradingview chart above is a monthly chart of the SPY (S&P-500 ETF). It’s in a bearish rising wedge trend reversal pattern and showing a bearish flag set up too. Furthermore, the Grok ROC algorithm, bottom of the chart, is about to plot a SELL signal. The many bearish technical signals confirm what the bond yield inversion is warning. Unfortunately, we’re set up to experience a lot of upcoming economic pain.

We do not have to be fearful. As an owner of an education company that specializes in teaching stock trading, I firmly believe that education is the key to success in the stock market. By teaching our students how to read market trends, identify opportunities, and manage risk, we are equipping them with the tools they need to succeed in any market condition.

By Des W Woodruff (aka d-seven)
 
As a seasoned stock trader (of 25 years) and enthusiastic supporter of cryptocurrencies, I’ve been closely observing the evolving landscape of digital currencies and their impact on the global financial ecosystem. The world is advancing in technology.

Central banks worldwide are increasingly realizing the need to innovate by developing their own digital currencies. This strategic move aims to maintain their competitiveness while also safeguarding their national currencies’ status within the international monetary sphere.

A growing number of countries, including Japan, the European Union, and China, are already forging ahead with their CBDC projects.
 
The significance of innovation in this context is paramount. Embracing cutting-edge technology and evolving with the times is crucial for central banks to stay relevant and adapt to the shifting demands of consumers and businesses alike. By spearheading the development of digital currencies, central banks can create a more efficient, secure, and accessible financial infrastructure that caters to the needs of a progressively digital society. BUT this innovation comes at a cost. A USD digital currency will make our big government—even bigger and with much more control. (Another subject for a different time).
 
Fostering innovation in the realm of digital currencies can spur economic growth by enabling seamless cross-border transactions, reducing transaction costs, and promoting financial inclusion for unbanked and under-banked populations. Ultimately, central banks that champion innovation and adapt to the rapidly changing landscape of digital currencies will be better positioned to maintain their competitiveness and uphold the global standing of their respective currencies.
 
If you haven’t heard about the so-called “Operation Choke Point 2.0,” yet, you likely will soon. Choke Point 2.0 has caught my attention, as it seems to be a coordinated effort by the U.S. government to restrict access to essential financial services for cryptocurrency companies. This move raises concerns that the U.S. administration might be responsible for the recent collapse of crypto-friendly banks such as Silicon Valley Bank, Signature Bank, and Silvergate Bank. By impeding the growth and development of the cryptocurrency sector, the government’s actions may ultimately be counterproductive to their own objectives. The jury is out on this one.
 
A primary concern here is the need to maintain the competitiveness of the U.S. dollar and preserve its status as the world’s reserve currency. The preservation of the USD is critical for the U.S. and all living within its borders. In a rapidly evolving global financial landscape, it is essential for the United States to embrace the digital revolution and adopt a digital dollar to remain competitive. And we better do this right, or the repercussions could be dire. The America losing the world reserve status would be devastating.
 
On this note, it’s technically within the U.S.’s interest to stifle any growth and adoption of digital currencies outside of the digital USD. All crypto are now deemed competitors and the U.S. will fight hard to maintain its global monetary status.
 
Furthermore, the government’s aggressive actions may discourage innovation in the financial sector, which is crucial for the growth and progress of the U.S. economy. By hindering the development of digital currencies, the U.S. administration may inadvertently push businesses and investors toward other jurisdictions that are more welcoming to the growing cryptocurrency industry. Such an exodus would negatively impact the domestic economy, as the country loses valuable talent, expertise, and investment.
 
Concerns surrounding Operation “Choke Point 2.0” are not unfounded, as the government’s actions in restricting access to financial services for cryptocurrency companies may ultimately undermine their goals of ensuring the USD’s competitiveness and preserving its world reserve status. As I stated, it is critical for the U.S. to recognize the importance of innovation and adopt a more progressive stance toward digital currencies to maintain its position as a global economic leader.
 
As a proponent of cryptocurrency, I believe the U.S. risks it’s global monetary status (either today or tomorrow) if a competing country, like China, establishes a digital currency that other countries recognize and trust before the USD becomes properly digitized. I do not want to see America lose its world reserve status. And for this reason, I can’t blame my government for trying to choke out its competitors. Bitcoin and Ethereum are indeed competitors, and formidable competitors at that.
 
In the long run, fostering innovation and collaboration with the cryptocurrency sector could prove beneficial for the U.S. economy and help preserve the USD’s global prominence. By demonstrating a willingness to adapt to the rapidly changing financial landscape, the U.S. could ensure that it remains at the forefront of digital finance and secures its position as a global economic leader.
 
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Des W Woodruff