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US stocks are on the verge of a correction as interest rates begin to rise, DataTrek says

US stocks are on the verge of a correction as interest rates begin to rise, DataTrek says

A trader blows bubble gum during the opening bell at the New York Stock Exchange (NYSE) on August 1, 2019, in New York City.
JOHANNES EISELE/AFP via Getty Images



US stocks are on the verge of a correction as interest rates begin to rise, according to DataTrek.



Investor focus will likely fixate on whether or not the Fed raises interest rates in 2022.



"Fed Funds Futures creeping higher is not good news for stocks," DataTrek said.



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A pick up in interest rates could knock the current bull market off course temporarily, according to a Thursday note from DataTrek.DataTrek co-founder Nicholas Colas said that US stocks are due for a sell-off following a strong 20% rally in the S&P 500 since the end of October.Interest rates have ticked higher in recent weeks, with the 10-year US Treasury Note jumping to 1.31% on Thursday from 0.91% at the start of the year. And even though the Fed has signaled that it does not foresee raising interest rates until 2023, Fed Funds Futures are beginning to signal that the Fed could begin increasing rates in 2022."The odds of a Fed policy shift next year has gone from 2% to something closer to 5% to 10%," Colas said. That doesn't represent the danger zone yet, "but the trend is clearly not our friend," the note said.
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