Federal Reserve’s Tarullo Resignation – What this means for the stock market and how you can make money?
Tarullo Resignation – When did this happen?
The news of the Federal Reserve’s Daniel Tarullo hit the news wires around 1:30 PM EST on Friday, February 9th. The resignation did not list a reason, but the message was loud and clear and we’ll discuss this next.
Tarullo Resignation – Why does it matter?
Daniel Tarullo was the regulatory point man for the Federal Reserve and was appointed by Obama with a mission to tighten bank regulation since the 2009 collapse. His term was through 2022, but given that Donald Trump wants to begin the process of loosening financial regulation, Tarullo resigned from his post with the Fed.
This was a clear signal to the market that new regulations are around the corner in addition to Dodd-Frank changes.
Tarullo Resignation – What is a good trade to take part in this play?
The stock market rallied on this news on Friday, mainly the XLF ETF that tracks the financial sector. Looser regulation is a big benefit for US banks as they can take on more leverage and risk, and start to party like it is 2007 all over again, forgetting the hangover of 2009.
The US banks are great individual plays, but at these already elevated prices getting in now is a risky proposition. Despite this news, it may be best to wait for a bit of a pullback and buy the dip rather than jump in now because you are afraid of “missing a move”. The best part about missing a move is that you will never lose money missing it, and the biggest benefit is that you actually miss 100% of the risk associated with it as well.
Here are some stocks to watch for:
Bank of America – symbol “BAC”
Wells Fargo – symbol “WFC”
Goldman Sachs – symbol “GC”
As always, it is important you do your own research and manage your own emotional and financial capital.
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The information contained in this post is solely for educational purposes and does not constitute investment advice. The risk of trading in securities markets can be substantial. You should carefully consider if engaging in such activity is suitable for your own financial situation. TRADEPRO Academy is not responsible for any liabilities arising as a result of your market involvement or individual trade activities.