In obedience to the mantra, “Don’t fight the Fed,” investors have remained committed to the process of Fed meets, Fed announces, markets react accordingly. Strongly supporting that belief today is the past four years’ results. Longevity and repetition have convinced investors and even most of the Fed’s committee members that this wonderful situation is a basic truth. Moreover, most also believe that the Fed’s easy money policy produces a win-win situation for everyone.
However, current conditions and a deeper analysis show both the fallacy and danger of acting on this mantra. The Fed’s easy money policy now is looking more and more like an unwise investment foundation. Also, there is growing commentary that questions the “omni-beneficial” label.
Even Wall Street is shifting from being mostly supportive of the Fed’s easy money policies to being less enthusiastic, even a bit contrarian. These reasoned views (not anti-Fed rhetoric) are warning signs that the Fed’s policies could be in for more questions, skepticism, even criticism. Therefore, we should drop the “Don’t fight the Fed” investment strategy and begin to think about ways to Fed-proof our portfolios.
This article is published on SeekingAlpha.com