The Federal Reserve has been on a rate-raising tear since 2022 – almost a historic tear. Rates are now higher than they have been in almost two decades.

The rate hikes have been a response to the rise in inflation, which was a result of post-pandemic demand and a decade of “helicopter money” policy that began after the Great Recession.

So after continually raising rates for over a year, is the Fed finally done?

Maybe.

It’s impossible to know for sure, but there have been some crucial developments lately that have given us some clues.

You see, the reason the Fed may be done is the bond market is actually doing the Fed’s job.

The Fed sets benchmark interest rates, but it does NOT actually set the market rates for lending, borrowing or savings. That is done by the bond market, specifically the 10-year Treasury bond.

Up until now, the 10-year has been signaling the Fed was done with rate hikes, and it’s been wrong month after month.

But over the past three weeks, the rate on the 10-year has jumped by as much as 10%, a huge move. (If the market moved 10% in three weeks, you’d really notice, right?)

That jump indicates that the bond market believes two things:

1. Rates are going to stay higher for longer.
2. Inflation is sticky.

Today’s Consumer Price Index report confirmed that inflation is being tamed… slowly.

Yesterday’s Producer Price Index said the same thing.

Last week’s employment data showed more strong job growth.

These are all bearish signals for interest rates.

But there are silver linings.

Wage growth is slowing, credit card delinquencies are rising and consumers are starting to feel the pinch.

You’re probably wondering… How is that GOOD news?!

The quicker the consumer gets hit, the sooner inflation declines, interest rates reverse course and the stock market recovers. Got all that?

Basically, the Fed will continue to threaten to raise rates, which will put a lid on the market. Sure, you may get rallies here and there, but in order for a new bull market to begin in earnest, the Fed has to signal that it is done.

And according to the bond market, there is one hike – maybe two – left. The end could be in sight.

YOUR ACTION PLAN

Now is the time to pick out your prospective buys, and you will want to pounce on them during any market corrections. The market will not ring a bell at the bottom, but if history is any indication, it will begin to rally in advance of the Fed saying it is at neutral. The signal to look for is the 10-year Treasury retracing its way to below 4%.

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