The Stock Market Is About To Explode - Fed Negative Interest Rates

The stock market is about to go up because of the federal reserve and negative interest rates

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The stock market is about to do something crazy because of something called the FEDERAL RESERVE and NEGATIVE INTEREST RATES as a result of the economic shutdown.

Here’s the theory: The stock market is about to go crazy and if you’re invested in the stock market, you’re potentially about to make a lot of money. Which is a really interesting theory considering I recently did a video that’s completely the opposite about why the stock market has a decent chance of falling.

In that specific video, I talked with Raoul Pal, his theory was that the whole economic system right now is on the brink of collapse because of what’s called the “insolvency” crisis.

That means it’s where companies don’t have enough money to pay their debt because they aren’t making any money due to the shutdown, which creates a negative feedback loop throughout the entire economy affecting pensions, stock markets, real estate markets, bond markets, and everything in between lose a lot of value from which there is no escape. He also may have been wrong because the stock market, might just explode and be worth a LOT more soon.

In an effort to keep the economy going, the Federal Reserve has plunged interest rates down to between 0 to 0.25% of a percent, cutting it close to negative interest rate territory. We’re not negative just yet, but the futures market is pricing in negative interest rates by 2021.

So does this affect us? Here's what will happen to the stock market and dividends if rates were to go negative. The good news with all the excess money, is people will likely be buying and reinvesting it into pensions, hedge funds, stocks, and that will drive the stock market as a whole - upwards. This also includes companies that pay dividends. You’ll also see many corporations use this as an opportunity to borrow a TON of free money.

However, negative interest rate policy will make the stock market an illusion because corporations will start to borrow tons of FREE money in order to buy back their own stocks causing the stock prices to higher - and it’s unlikely they’ll have learned from this current situation we’re in.

What about real estate? Both good and bad, here's why: the good thing is that you can borrow money cheaper and easier, but this also drives the prices of homes higher.

This is especially true for the average home cost where people will rush to take out a cheap loan that basically pays them to have, only to end up buying a house that’s potentially more than they can afford because - FREE MONEY. And because negative interest rates IN THEORY, should not last that long, once the interest rates reverse to normal, home buyers can lose a lot of value on their homes as their prices adjust back down to reality. Remember, the higher the interest rate is, the lower the home prices, and vice versa - the lower the interest rate, the higher the home prices.

How does this affect average ordinary every day people, the savers? Negative interest rates effectively get rid of how much money banks can earn on our deposits, so banks can potentially stop loaning money and just sit on cash because they don’t want to get penalized. This can implement a borrowing freeze on the economy.

And if you have a savings account, especially one with a bank like ally bank which is supposed to be a high yield savings account, you’re no longer going to earn any money on it which means if you’re relying on that for income or stability, you’re going to be pushed to take bigger risks by investing in the stock market or elsewhere to see similar returns or forced to literally hold cash.

The likelihood of this happening will LARGELY be decided most likely after we reopen the economy and put people back to work. So if the stimulus proposals and the tax cuts or payroll credits and whatever else Democrats and Republicans agree to include in the Cares Act actually gets people back to work, and if the illness calms down, then most likely we won’t see anything like negative interest rates - probably ever.

Further Research:
https://www.forbes.com/sites/chriscarosa/2019/08/20/what-are-negative-interest-rates-and-how-can-you-make-money-from-them/#5ea1d5a5409b