A trade of a lifetime idea for 2025 This is a potential trade of a lifetime. Long term yields have gone up since the Fed started cutting. Although counter intuitive, this is what they do most of the time. The future cuts are going to be bull steepening (i.e. we are close to if not at the bottom for
). Although the Fed says it will cut less in 2025 let’s look at the factors that could make them wrong (TWW, They have always been wrong)
1) Continuous jobless claims and unemployment are going steadily up. The Fed will panic if this trend continues.
2) Inflation is still in a downtrend and the worldwide data suggests it will keep going down. Trump's policy can be inflationary but like any administration, they will take time to implement them and will not likely affect the data right way. Besides, Trumps want tariffs but low inflation and low interest rates (You can't have your cake and eat it too). Regardless, this is why I am not predicting further than the end of 2025 at this point.
3) The economy appears to grow strong, but the USA can't be isolated from the rest of the world for ever. The European and China problems are going to affect the growth.
4) The stock market is overvalued so a big correction in 2025 is very likely. In which case, money will flow in bonds and the Fed will intervene.
5) Long term yields in other countries (Germany, Canada, Switzerland, China...) Have started to go down. The USA is just a bit late because the Fed is slow to react and still hawkish, but my bet is… not for long.
6) The US Dollar is super strong. What will the Fed attempt to do? Keep the interest differential between them and other countries low (i.e. drop interest rates)
How much can this be worth?
Lets say you have $13,000 and buy one UB1! Contract that you roll over throughout the year (You need about $8,000 of margin so you have $5,000 to cushion a potential fall below the October 2023 low, where I suggest you put your stop loss). If it reaches the $181’06 level, you make approximately $62,968 or 484% on your $13,000 over 9 to 12 months and you risked only $5,000.
If by any chance it reaches the $209’20 level, you make approximately $91,093 or 701% on your $13,000 over 9 to 12 months and you risked only $5,000.
If you don’t like futures, you could do a similar trade using NASDAQ:TLT although it will be a bit less impressive but also less risky. I'll let you do the math.
Note: This is not a financial advice, trading comes with risks. Expected results are not guaranteed results. This is only an opinion, take it for what it is.
