THE END of the Dollar - Fed's NEW Plan

The Fed released their new economic plan, and our money just got weaker. Here’s what it all means for the stock market

► My Stock Portfolio + Stock Tracker

► Get 2 Free Stocks on WeBull (Valued up to $1400 when you deposit $100)

► ROBINHOOD Free Stock

► Open A Roth IRA

► Follow Me On Instagram

Let’s talk about the Federal Reserve, and we can't talk about the fed without talking about Jerome Powell who just released a warning with what’s about to happen to the economy, what their estimates are for our future, and what their planning to do to interest rates for the next few years. It’s called the SEP or the SUMMARY of Economic Projections. Meanwhile, the stock market is painting a rosy picture of the future but if you're investing, you have to be prepared for the consequences.

The fed is predicting that the GDP, the Gross Domestic Product will contract 6.5%, and that unemployment will be around 9.3% by December. In comparison to what we have now which is around 13.3% so it will be better, but not exactly good.

To make things worse, I recently saw an article called The Dollar Is Getting Weaker! This immediately made me think of inflation because we’ve been printing so much money - which begs the question, where does all this printed money come from and can it crash the stock market? Could we just print enough money to pay back the national debt of 26 TRILLION dollars and counting? Theoretically, yes, but practically, that would be a very bad idea for the economy.

While we won't be printing the money to pay back the national debt, we will be pumping another one trillion dollars this month into the economy to keep the party going.

There's 2 main reasons for why the stock market dropped really hard:

Reason number #1 is that we’re noticing more ill cases popping up, this creates fear and uncertainty in the stock market because a second economic shutdown is what we are afraid of most.

Reason #2 is because Jerome Powell just released his prediction about the economy and it wasn't good. Normally, the Fed chairman can sort of act like a cheerleader to help boost the economy, and while his job is to be accurate, he also has to be somewhat optimistic - because that’s in our best interest. If the fed came out and told us that the end is near, then things would be a lot worse. The stock market is smart enough to understand this, so it dropped when the Fed released their prediction.

With the newly updated dot plot, most fed members have agreed to hold 0% interest rates all the way until 2022 if necessary. That means they’ll do ANYTHING to keep the economy afloat but for now, no interest rate changes.

What do higher interest rates mean exactly though? Here's what they mean. When the Fed signals HIGHER interest rates, that means banks are much more profitable, they get to lend money out to us and we pay them more interest, so they make more money. BUT, if the interest rates are low, like they have been and will be for quite some time, is when bank stocks generally don’t do too well, because they don’t make much of a profit. Which is also one of the reasons why bank stocks are generally discounted at todays prices. REITS are similar, when interest rates are high, companies that hold real estate generally tend to see the prices of those assets go up and they make more money so we get to make more money. So interest rates go up, banks and REITS go up as well.

But what about the dollar and our money getting weaker? If we look at a chart of what the dollar has done in the last 3 months, it looks like it's declining, but the reality is, the last 5 years saw a huge growth of the US Dollar. That’s because the US dollar is the world reserve currency, that means when times are bad, everyone wants to HOLD dollars instead of their native currencies.

When the dollar is STRONG, it means it’s cheaper to travel to other places of the world, we have more purchasing power. In relation to the stock market, the currency doesn’t really move the direction of the stock market. Some companies will benefit from it, and others will suffer from experiencing less trade.

A weaker dollar means our goods become much more competitive on a global market, which means not only will other countries want to do more business with us, but it would also encourage us as the consumer to buy more stuff at home.

Read more about currencies here

*Links above include affiliate commission or referrals. I'm part of an affiliate network and I receive compensation from partnering websites. The video is accurate as of the posting date but may not be accurate in the future.