Last week, my wife and I bought a new car. Her beloved van of 18 years had finally conked out. It was time for a new set of wheels.

I was afraid we would get gouged. Ever since the onset of the coronavirus pandemic four years ago, car prices have shot up.

However, we ended up getting a better deal than I expected. According to our salesman, the month of March started out strong.

But suddenly, buyers dried up around the third week of the month. I think I know why.

That is when Fed Chair Jerome Powell said that he expects to start cutting interest rates soon. By the end of this year, the Fed’s policy rate is expected to be 75 basis points (three-quarters of a percentage point) lower than it is now.

Most cars are bought (or leased) using credit. According to Statista, nearly 80% of all new car sales in 2023 were financed.

That put me in an advantageous position. I had been saving up money for this purchase, so I was paying in cash.

But if I were going to finance this transaction, I might have waited. Especially if I thought our van could make it until the fall.

That’s when the new models for next year come out. Whatever cars are left on the lot from this year are discounted to make room for the new cars.

For consumers using credit, that could be the optimal time to buy. But since I was a cash buyer, I decided to make my move now.

Losing Interest

I’m lucky to be able to pay cash for a new car. But for most Americans, buying on credit is a way of life.

That is especially true when it comes to big ticket items such as cars and houses. Last week, I wrote about one homebuilder stock that has gained nearly 90% since I recommended it to my PF Pro readers two years ago.

Now, I’m wondering if it is time to sell that stock. If consumers believe that interest rates should be coming down soon, they might wait until that happens to buy a new home.

You may not think saving half a percentage point on a loan makes much difference. However, it adds up over time.

The monthly principal and interest payment on a $400,000 mortgage at 6.5% if $2,528. Over the life of the loan, that works out to $510,178 in total interest paid.

However, at 6.0% the monthly payment drops to $2,398 and total interest paid of $463,353 over thirty years. That’s nearly $50,000 in savings.

That may be enough to dissuade some homebuyers from acting now. In fact, that may already be happening. In February, new home sales fell by 0.3%.

That is why I am anxious to see the numbers for new car sales for March when they come out. If they are lower than expected, that may present a profitable trading opportunity in the stock market.

Stop and Go Traffic

I recommended automaker General Motors (NYSE: GM) to my PF Pro readers eighteen months ago while it was trading near $40. Last fall, GM fell below $27 during an autoworkers’ strike that shut down plants for weeks.

But since then, it has rallied back above $45. Two months ago, the company released its fiscal 2023 full year results and guidance for this year.

That guidance included an increase in diluted/adjusted EPS (earnings per share) of 16% to 29% over last year. That’s the number Wall Street will be tracking closely when GM releases its fiscal 2024 Q1 results in a couple of weeks.

Don’t be surprised if the sales numbers aren’t quite as strong as Wall Street expects. If consumers are waiting for lower interest rates, then some of those sales may be deferred until later this year.

General Motors may still achieve its full year guidance. However, the first half of this year may be weaker than the second half.

In that case, waiting until after the company releases its first quarter results to buy the stock could be a smart move. If GM tanks later this month, you can pick it up cheap before it rallies later in the year.

And if you’re feeling frisky, consider buying the call option that expires in January 2025. If car sales do rebound during the second half of this year, that trade could be a big winner!

Editor’s Note: As central banks move markets via monetary policy decisions, investors have sought refuge in decentralized assets such as Bitcoin (BTC) and Ethereum (ETH), which are perceived as immune to government manipulation and control.

Additionally, advancements in blockchain technology and decentralized finance (DeFi) have expanded the utility and functionality of cryptocurrencies, attracting a broader audience of investors and users.

Every portfolio should have exposure to crypto. But you need to be informed, to make the right choices. The experts at Investing Daily have done the homework for you.

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