Let’s take a look under the hood of your portfolio and see if you are [indeed] “fighting the Fed”? Do you even know what fighting the Fed means? We’ll start here. “Never Fight the Fed” is one of the oldest monikers on Wall St., and it’s true about every time, or in any instance I’ve ever witnessed. What this phrase is referring to is that whatever course of action the Federal Reserve takes, [whether it’s embarking on a tightening cycle or an easing of monetary conditions], investors should always follow suit in order to realize their most favorable outcome. In other words, embarking on opposite courses of action [those against the Fed] are more than likely going to be detrimental to your psyche, and your portfolio.

When the Fed is trying to stimulate [or expand] the economy they will purposely lower interest rates or even undergo one or more quantitative easing exercises to increase liquidity out there, and greatly reduce borrowing costs, [ref. 2009 to 2015]. However, when they are implementing a tight monetary policy initiative the opposite is true, in this case they are trying to rein in consumer spending to reduce inflationary pressures [as is the case today]. Increasing borrowing costs is one way to accomplish the Fed’s goals here. Liquidity tends to dry up when the Federal Reserve is in a tightening cycle which describes where we are today in the United States [though we are at the very beginning of them reducing their unprecedented $9 trillion dollar balance sheet, it’s just now starting to roll off]. Our Federal Reserve is in a pickle, they have an enormous problem as of this writing, they need to get U.S. inflation back down to around 2% annually. In order to do this, there is much work ahead of them as inflation is currently running north of 10% [in several sectors] making our current U.S. expansion “unsustainable”, and they know it. So what do you [as a private citizen] need to know?

And what are you doing? Well if you’re doing what you used to do when inflation was 2% or less, then chances are about 100% that you’re “fighting the Fed”? Shame on you, and your portfolio deserves a good spanking! Traditionally stock prices will do poorly in a high inflationary environment, [while modest inflation is always expected, runaway inflation will erode both bond and stocks prices in the end.] Following this argument, if you’re long stocks at a time when the Fed is aggressively hiking U.S. interest rates then you are indeed “fighting the Fed”. See how easy this is? 🙂 LMAO!

I really don’t care what any of these suckers on financial market news programs say, if you’re invested in the stock market when the Federal Reserve is aggressively raising interest rates don’t expect great and wonderful things to happen to your portfolio and your life experiences in general. If you’re looking for great and wonderful things, don’t look toward the stock or bond markets to deliver it when the Federal Reserve is way behind the inflation curve [as is the case today]. Look elsewhere instead… and by all means – bon Voyage! 🙂