💥HOW it all started and WHY you should be interested as a TRADER.

The market mostly respond to CPI data and rate cuts with high volatility. We saw what happened on 18th September, 2024 when FED cuts rates by 50 bps. It was a huge bullish wave even though it was short lived due to the Middle-East crisis.

This is how it started:

After Japan surrendered to the US in August 1945, that marked the end of the World War II. According New York times, that was the happiest day in American History. But there is a saying that, “History is just one damn thing after another”.

The joy of the war ending was quickly met with the question, “What happens now?”

Sixteen million Americans, that is 11% of the population at that time, who served in the war. Their average age was 23. Within 18months, all but 1.5 million of them would be home and out of uniform.

And then what?

What were they going to do next?

Where were they going to work?

Where were they going to live?

Those were the important questions of the day, for two reasons. One, no one knew the answers. Two, if they couldn’t be answered quickly, the most likely scenario in the eyes of many was that the economy would slip into the depth of the Great Depression.

Then came the low interest rate and the intentional birth of the American consumer as the panacea of the crisis. The Federal Reserve rate cuts made borrowing to buy homes, cars, gadgets and toys really cheap. This was great as consumption became an explicit economic strategy in the years after World War II and it ripple effect is always in the huge liquidity that floods the market.

With rate cuts came the explosion consumer credit cards which were introduced in 1950. Store credit, installment credit, personal loans payday loans all took off and have been around till now.

CPI data on the other hand is a smart way to measure the inflation level in a country, which have a large impact on central bank's decision-making processes. When inflation gets too high, it is very likely that the central bank will raise interest rates, and when it is too low, they will lower interest rates.

In conclusion, the market mostly responds to CPI data and rate cuts with high volatility. We saw what happened on 18th September, 2024 when FED cut rates. Let us brace ourselves with the volatility that will flood the market as we anticipate the upcoming CPI data. This could spark the Q4 Bullish Cycle.

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