With stubborn inflation, the Federal Reserve is in no rush to cut interest rates.
This morning, we learned that the consumer price index (CPI) was up 0.3% in January, which came in slightly higher than expectations for 0.2%. Making things worse, shelter prices were up 0.6% in January, and still up 6% on the year. Services excluding energy costs was up 0.7%, which was up sharply from the 0.4% reported in December.
And unfortunately, “Evidence of still-sticky services inflation is likely to give the Fed pause before cutting rates too quickly, especially as it tries to avoid paring back on tight policy too quickly and risk another wave of inflation,” said Jason Pride, chief of investment strategy and research at Glenmede as quoted by CNBC. “Rate cuts are likely still on the table for this year, but they may begin later in 2024 than the market may be anticipating.”
That could lead to even more downside in the markets.
One way to trade that potential downside is with a bet on volatility, which we can trade with:
ProShares Ultra VIX Short-Term Futures ETF (UVXY) – The ETF was designed to match two times (2x) the daily performance of the S&P 500 VIX Short-Term Futures Index.
iPath S&P 500 VIX Short-Term Futures (VXX) – The VXX ETN provides exposure to the S&P 500 VIX Short-Term Futures Index.
ProShares VIX Short-Term Futures ETF (VIXY) – ProShares VIX Short-Term Futures ETF provides long exposure to the S&P 500 VIX Short-Term Futures Index, which measures the returns of a portfolio of monthly VIX futures contracts with a weighted average of one month to expiration.
