Volatility and Fed Rate Cuts

by roepes

I’m holding a position of VXX and have traded it a few times over the last six or so months. Prior to the three rate cuts, its movements were more noticeable, more drastic, and tended to be more volatile in its upward movements. Since the rate cuts, the volatility has dampened considerably, and especially since talks of the trade war have gotten more positive along with the most recent rate cut, it has trended downward drastically.

The Fed could be taking volatility out of the market with these cuts in order to counteract some of the trade war dialogue, but could it be part of a long game to help the markets weather an impending recession? I realize Powell has reasserted that the Fed’s position is it is not expecting a recession. I think he may have said this after the most recent cut or along with it.

Has anyone seen any updated recession predictions from reputable sources like credit ratings agencies or basically anyone other than Peter Schiff and other bears? I think there was a consensus of one happening in the first part of 2020, but I haven’t seen any updated takes.

Personally, I think the election candidates will bring back some volatility, but more recession signals (manufacturing index, unemployment rising) would do more harm and require more cuts.

 

Disclaimer: Consult your financial professional before making any investment decision.

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