Public trading strategy
Fed pivots from rate cuts to rate hikes — short the housing and banking sectors
Thesis
Banks make money by charging higher interest on loans than they pay on deposits. However, if the Fed aggressively raises rates to fight inflation, borrowing becomes too expensive, loan demand collapses, and borrowers start defaulting. The Fed officially shifting to a 'hawkish' (anti-inflation) stance is a direct headwind for bank profitability in the coming months.
Strategy approach
Build a strategy to short regional banks via KRE using the Daily timeframe. Entry: short when price breaks below the 50-day moving average on higher than average volume. Exit: buy to cover on a 1:3 risk/reward ratio, or close if the price crosses back above the 50-day moving average.
Markets and timeframes
KRE1D