The Fed’s Secret Plan to Crash the Stock Market Revealed

The Fed’s Secret Plan to Crash the Stock Market Revealed

Over the last few weeks, I’ve been building a case that the Fed and President Trump are at war with one another.

To review, the basic outline is as follows:

  1. The Fed participated in the Deep State’s coup against President Trump, intentionally hurt the U.S. economy and the U.S. stock market by aggressively hiking interest rate and shrinking its balance sheet by $600 billion.
  1. President Trump caught on to this scheme in late 2018. Since that time, he has been planning his revenge – bullying the Fed in to easing policy again, with the ultimate goal of eventually taking over the Fed by designating the control of the U.S. dollar as a matter of national security.

Thus far, it has looked as though President Trump has won this round of the war – the Fed appears ready to actually cut rates. At least, the Fed is indicating that it’s considering such a move.

However, I just uncovered a smoking gun…

One that, if correct, reveals that the Fed has something truly sinister planned for the President…

I’m talking about a stock market crash triggered by the Treasury market.

To understand this signal, you first need to know how the Treasury market works.

How to Spot a Well-Behaving Bond Market

When we talk about the Treasury market, we’re actually talking about Treasury bonds that are issued for different time periods ― ranging from four weeks to 30 years.

Of these various bonds, two are considered the most important for examining major changes in riskiness for the financial system: the Two-Year Treasury and the 10-Year Treasury.

These two Treasuries are most important for a simple reason.

Two years represents the near term prospects for the economy… 10 years typically encompasses an entire economic cycle (both growth and contraction).

Together, the yields on these two Treasuries are called a yield curve.

It’s called a “curve” because under normal conditions, bond investors demand that a Treasury bond pay them a greater yield for lending their money to the U.S. for a longer time period.

So under normal conditions, the yield on the 10-Year Treasury is greater than the yield on the Two Year Treasury.

Of course, when things are operating as normal we don’t need to worry.

It’s when the bond markets enter a period of abnormal conditions ― called a yield curve inversion ― that we need to pay attention.

A Misbehaving Bond Market Can Cause Serious Problems

The yield curve inverted earlier this year.

As a standalone item, this isn’t a huge deal. It’s when the yield curve inverts and stays inverted for a prolonged period that the financial system gets into MAJOR trouble.

One way of determining whether or not a yield curve inversion is the real deal or not is to compare it to its 21-month moving average. The 21-month moving average is simply a line represented by taking the average of where the yield curve was trading for the previous 21 months.

If the yield curve breaks above this line but falls back under it, the inversion is just a temporary issue. But if the yield curve breaks above this line and stays there, a stock market crash usually follows.

See for yourself. The last two times the yield curve broke above its 21-month moving average and stayed there were in 2000 and 2007 (marked on the lower half of the chart).

Both times marked the beginning of the end for the stock market, with a MAJOR crash coming soon after (marked on the top half).

Chart

Now let’s take a look at where the yield curve is relative to its 21-month moving average today.

The Yield Curve Flashes a Major Warning for Stocks

Here again, the 10-Year Treasury is in black, the Two-Year Treasury is in orange.

Chart

As you can see, the yield curve has inverted, and is now rapidly approaching its 21-month moving average. If it breaks above that line and stays there, stocks WILL CRASH.

At its current pace, this would happen sometime in early 2020 – right as President Trump begins to aggressively campaign for his re-election later that year.

You can imagine the impact this would have… A stock market crash right as President Trump is talking about his track record of success with the economy and the stock market.

Meaning, the President better watch out!

Those investors who are correctly positioned for this have the opportunity to generate literal fortunes.

Imagine being able to time the currency markets to profit from what is about to happen to central banks days in advance?

I’ve spent the last six months developing a trading strategy to do precisely this.

In the last month alone, we’ve seen gains of 67% in two days’ time, 75% in five days’ time, even 100% in four days’ time.

I’ll tell you all about it in the coming weeks, but suffice to say, the opportunity to generate literal fortunes from central bank schemes is here.

Best Regards,

Graham Summers

Graham Summers

Editor Graham Summers has spent the last 15 years building a reputation as one of the most sought after and highly respected investment strategists on the planet. His work has been read and quoted by former Presidential advisors, award-winning institutional analysts, U.S. Senators, and more. He’s one of the few analysts on the planet to...

View More By Graham Summers