Don't Fight The Fed
0Don't Fight The Fed “Don’t fight the Fed,” has been a winning mantra since the Financial Crisis of 2008 / 2009. The Fed made stocks the only game in town when it lowered short-term interest rates to zero and forced investors into a “risk-on,” TINA mindset. The stock market stumbled along the way, but Federal Reserve policy kept interest rates low enough to prevent real damage to the bull market. The stock market responded immediately, making one new high after another, rewarding traders who “bought the dip.” E-mini SP 500 futures made a new high on Thursday, December 16th, posting an incredible 21-month gain of 118% from March 2020 Covid lows. We believe it has more to do with the Fed’s announcement to switch into tightening mode to combat inflation. “Anchoring” Can Drag Down Returns Nothing the Fed announced at its meeting last week was bullish, but that didn’t stop stocks from making new highs the very next day. Artificially low interest rates drove real yields in debt securities like bonds, notes and CDs into negative territory a long time ago.