Since the RBA began hiking rates in April this year, the media has been full of speculation and it is easy to get worried that they will keep going up and up until half the country defaults on its mortgages.
But B.Invested founder Nathan Birch chooses to stick to the economic data that is out there when forming his own opinions.
One economic metric in particular that he keeps a close eye on is the ASX’s cash rate futures implied yield curve.
The most recent curve shows a peak is not far off and the yield curve begins to head downwards again at the end of next year.
Nathan believes that in the coming months and weeks, the futures yield curve will begin to drop off even more. This will lead to a peak in the cash rate, which will pave the way for rates to start coming back down.
What happens next?
Forget about what the media says, Nathan believes that a lot of people out there writing stories don’t own investment properties and aren’t across the real numbers that show where the money is actually flowing.
Nathan says there is a liquidity squeeze underway right now and we will soon see pressure from that filter into the market and spark rate reductions.
The next rate movement may still be up, which would happen in November. But after this the RBA has two months of not meeting in December and January. So sometime between now and February, Nathan believes the market may begin to implode to such an extent that a reversal in the central bank’s monetary policy is required.
This would mean the next rate cut happens between March and the end of the financial year.
Arm yourself with knowledge
Nathan is no financial adviser and this is not financial advice, but the reason he watches the data that he does is because he has a massive portfolio to protect, with more debt on it than most people could comprehend.
He has been through all sorts of market fluctuations, twists and turns in his two decades of investing. Doing the right research has allowed him to accurately predict previous rate cuts, value growth cycles and market movements all over Australia.
He is living proof of why you need to arm yourself with the right knowledge and ignore the lies and speculation of those around you that don’t know any better.