Game of Trades: This Is Now Worse Than Before the 2008 Financial Crisis

The stock market closed out the first quarter of the year entering a new bull market. Many stocks more than doubled off of their lows last year, particularly beaten-down tech stocks. But overall, with the average stock up over 20 percent from their lows, things look bullish.

However, there are always a few dark clouds in the investment world. And the clouds today are fairly dangerous ones.

That’s because the issues with the banking sector and the credit market are likely to continue. While there’s been a lull following the quick collapse of three banks last month, more danger lies ahead.

The big danger for investors is that the market has tried to look too far ahead. Investors have been betting on the Federal Reserve to “pivot” and start cutting interest rates.

Yet so far, the bank has continued to raise rates. They’ve simply slowed the pace of the increase.

Meanwhile, the spread between the two-year yield and the three-month bond yield shows a collapse in the past month. It’s not in the deepest negative territory since the 1970s. That suggests that the bond market sees interest rates decreasing over the next two years.

While it’s likely we still have another rate hike ahead, it’s time to start planning for a shift in interest rate policy.

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