Rates Are Rising

The Federal Reserve Board (the Fed) cut rates last month, but, as I suggested would happen when I said fighting the Fed made sense, interest rates are rising. Here are U.S. Treasury yields from Bloomberg:

Over the past month, rates are actually a lot higher! Of course, they are lot lower still than they were a year ago. The curve is getting steeper, as the 10-year now yields more than the 2-year, though both are well below the current Fed Funds Rate of 4.75-5.00%.

Mortgage rates aren't falling either. When I wrote that piece on September 19th, the day after the Fed cut rates for the first time in a long while, the Freddie Mac mortgage rate , which is published weekly, of 6.09% rose just slightly to 6.12% on 10/3. I expect it to rise to 6.2% or so. Freddie Mac shares some perspective when it publishes the rate, and this is what they said last week:

The decline in mortgage rates has stalled due to a mix of escalating geopolitical tensions and a rebound in short-term rates that indicate the market’s enthusiasm on rate cuts was premature. Zooming out to the bigger picture, mortgage rates have declined one and a half percentage points over the last 12 months, home price growth is slowing, inventory is increasing, and incomes continue to rise. As a result, the backdrop for homebuyers this fall is improving and should continue through the rest of the year.

Stocks aren't falling yet, but they aren't exactly rising either. The three major indices that I watch include the S&P 500 (SPY), the NASDAQ 100 (QQQ) and the Russell 2000 (IWM). The R2000 has dropped since the Fed lowered rates, and the other two are up but below where they were about a week afterwards:

Last week, I shared my perspective that those who want to protect against inflation should favor Treasury Inflation-Protected Securities (TIPS) over gold. Since then, gold, as measured by the ETF GLD, has dropped just a bit:

Again, this is a big potential trade! Here is the past decade of total returns for the Vanguard Short-Term Inflation -Protected Securities Index fund relative to GLD:

I have invested a lot in the iShares TIPS Bond ETF (TIP), which is currently 16.8% of my IRAs. I continue to bet against NVIDIA (NVDA) too.

Betting against stocks hasn't worked this year, but rates are rising despite the FOMC action last month.