I correctly predicted online savings and money market rates going above 2% before October 2018, online one-year CD rates going above 2.50%, and 5-year rates going to 3.50%. I am now predicting that online savings rates go above 3% in 2019, and that 1-year rates will go above 3.50% and 5-year rates above 4.50% in 2019. The Fed is guiding that way. And, even if Trump tries to remove Jay Powell, rates will continue to move up and it is good for the country to normalize interest rates. If you follow my prediction, you will basically continue to be in savings accounts and you will not lock into CDs longer than one-year.
I also predicted the stock market’s assent and its decline, as well as the decline in bitcoin. Bitcoin is going below $1,000 and it is never coming back. The stock market will go much further down over the coming months, but it will ultimately end 2019 a little higher than where it is right now. Bond yields will climb and real estate will continue to fall. Cash in the form of savings and CD rates will match the stock market’s performance in 2019, and outperform everything except perhaps oil, gold and some other precious resources (that are all starting the year at such low bases that they have nowhere to go but up).
My 2018 prediction about the 25th Amendment was premature and based on hopeful speculation. It didn’t come to pass in 2018, but it will in 2019. Pence will also become implicated in the Mueller probe, leading to his quick resignation or impeachment. Pelosi’s elevation to the Presidency will be the impetus that causes the stock market to stop falling.
And, just like 2018, we’ll be happy and surprised at the end of the year that the country is still intact at all.
If you are like most Americans, you have just learned that you have been kidding yourself for years.
We believed that the economy could grow quickly in spite of the 2016 election outcome. We believed that the Republican Congress could grow our economy by passing a tax law that ignores the national debt and penalizes residents of blue states. We believed that fights with our allies were good. We believed that picking a fight with the Chinese would be in our long-term interests. We even believed that Facebook could be a technology leader when their only innovation was to abuse personal data in order to provide a forum for feeding lies and deception to the most vulnerable.
We’ve just experienced a December that has been more brutal than any since 1931. Everything comes home to roost quickly when all major US indices fall 7% in one week.
When we last experienced a stock market fall of this magnitude in one week (September 2008), we were a lot closer to the market top than we were to the bottom.
In 2018, cash has now outperformed everything.
I am not a proponent of building walls. They keep good ideas out and serve political gains for those who demand them. But, things could clearly get a lot worse in 2019, and this just might be the time to build one around your future and your savings by raising your allocation to cash.
Over the past year, with each raise, the major online banks have competed to be first to move their savings rate within the new range. Within the last three days, several online banks have raised their online savings rates consistent with the new Fed Funds range. As of this publication, there are nine online banks with savings or money market rates above 2.25% APY. Depending on where you live, you will probably also find savings and money market rates at local banks and local credit unions that are above 2.25% APY.
However, many of the most well recognized online banks have yet to raise their savings and money market rates. While Ally raised its No Penalty CD rate to 2.30% APY and Marcus had raised its to 2.25% APY a week ago, Synchrony Bank, Barclays Bank Delaware, American Express Bank and Purepoint (to name a few) have remained frozen and unresponsive to the new Fed Funds target.
In fact, the major online banks have also chosen not to raise their CD rates, leaving them at rates that do not reflect expectations of higher rates over the course of 2019.
It appears, therefore, that many well known online banks are placing a bet. They are hoping that you are so focused on your huge stock market losses this last week and a reckless leader who is unleashing chaos across the globe, that you will not notice that they are reaping savings by not passing on competitive rates to you. They are also hoping that you are preoccupied with Christmas and New Years.
But, in spite of it all, there is competition for your cash and you should be moving it, when appropriate, so that the rate you are earning lies with the new Fed Funds target rate.
