For more than five years, the mantra for investing has been, “Don’t fight the Fed.” Despite weak revenue growth and geopolitical crises, continuous calls for a correction have proven foolish and the market has surged 200% since its 2009 bottom. The reason is simple. As the chart below shows, the injection of nearly $3.5 trillion by the Federal Reserve has made all other issues of little importance. You simply cannot pump that much money into the system without putting a huge driver behind asset prices. But now the Federal Reserve is talking about increasing rates and… Read More
For more than five years, the mantra for investing has been, “Don’t fight the Fed.” Despite weak revenue growth and geopolitical crises, continuous calls for a correction have proven foolish and the market has surged 200% since its 2009 bottom. The reason is simple. As the chart below shows, the injection of nearly $3.5 trillion by the Federal Reserve has made all other issues of little importance. You simply cannot pump that much money into the system without putting a huge driver behind asset prices. But now the Federal Reserve is talking about increasing rates and has already reduced its bond-buying program to just $15 billion a month from $85 billion last year. The flow of free money into the system could soon reverse and investors are getting anxious. If you sell your stocks and wait it out in cash you’ll lose upward of 2% to inflation every year. Holing up in bonds doesn’t look much better with rising rates threatening prices and yields hovering around all-time lows. Fortunately, the game hasn’t changed, but it may be in a different language. Don’t Fight the Fed, European Style Europe has yet to see the economic rebound we have… Read More