Young Research & Publishing Inc.

Investment Research Since 1978

Disclosure

  • About Us
    • Contributors
    • Archives
    • Dick Young’s Safe America
    • The Final Richard C. Young’s Intelligence Report
    • You’ve Read The Last Issue of Intelligence Report, Now What?
    • Dick Young’s Research Key: Anecdotal Evidence Gathering
    • Crisis at Vanguard
  • Investment Analysis
    • Bonds
    • Currencies and Gold
    • Dividend Investing
    • ETFs & Funds
    • Investment Strategy
    • Retirement Investing
    • Stocks
    • The Efficient Frontier
  • Investment Counsel
  • Retirement Compounders®
  • Free Email Signup

What Happens if the “Fed Put” Is Over for Good?

February 1, 2023 By Jeremy Jones, CFA

Chair Powell presents the Monetary Policy Report to the Committee on Financial Services. July 10, 2019. Photo courtesy of the Federal Reserve.

In the Financial Times, Richard Bernstein examines the possibility that the “Fed put” might be over for good. He writes:

Investors have been acting as though the central bank is ready, willing and able to supply the easy money protection of the Fed put. The growing notion that inflation has peaked and the central bank will soon “pivot” to lower interest rates has fuelled a rally so far during 2023 in the riskiest, most speculative assets. Meme stocks are up more than 25 per cent, bitcoin is up more than 40 per cent and the Ark Innovation Fund that invests in speculative tech prospects is up more than 30 per cent. The best-performing US sectors year-to-date are communications, consumer discretionary and technology.

If the Fed put is a thing of the past, history suggests traditional defensive sectors tend to outperform when there is a combination similar to today’s tighter monetary policy and decelerating corporate profits. Needs outweigh desires and sectors such as consumer staples, healthcare and utilities typically lead.

Longer term investors should ignore themes that we have derisively called “cute wiener dogs in the metaverse” to focus on the woeful US underinvestment in real productive assets. Potential returns seem attractive from longer term opportunities in public and private sector infrastructure and manufacturing capacity. Few investors seem aware that analysts’ bottom-up forecasts show the energy sector could grow earnings more than twice as fast as the technology sector over the next five years.

It is certainly understandable that financial market observers want the Fed to reverse course and write another put option. Much of the financial sector’s business has been built on generous and cheap money.

However, the entire credibility of central banking is on the line and the Fed put should end. No one wants a recession, but allowing inflation to reignite could damage the US economy for a decade or more and, in the current volatile political environment, could even destabilise the governments of the US and other nations.

Read more here.

Share this:

  • Email
  • Twitter
  • Facebook

You Might Also Like:

  • Fed Still Way Behind the Curve
  • Biden Fed Pick Withdraws from Consideration
  • Can the Fed Avoid Catastrophe?
  • Author
  • Recent Posts
Jeremy Jones, CFA
Jeremy Jones, CFA, CFP® is the Director of Research at Young Research & Publishing Inc., and the Chief Investment Officer at Richard C. Young & Co., Ltd. CNBC has ranked Richard C. Young & Co., Ltd. as one of the Top 100 Financial Advisors in the nation (2019-2022) Disclosure. Jeremy is also a contributing editor of youngresearch.com.
Latest posts by Jeremy Jones, CFA (see all)
  • Who’s to Blame for Banking Vulnerability? - March 17, 2023
  • Mortgage Market Not Expected to Settle Down Soon - March 17, 2023
  • Were Silicon Valley Bank’s Motivations for Taking Losses Pure? - March 16, 2023

Search Young Research

Most Popular

  • Silicon Valley Bank: What Do Investors Expect?
  • What’s Going On with Banks and Are My Deposits Safe?
  • Will the Black Swan Usher in Digital Dollars?
  • The Education of Barney Frank
  • “Will We Have Enough to Live On Forever?”
  • Vanguard Wellesley (VWINX) vs. Wellington (VWELX): Which Fund is Best?
  • Credit Suisse Announced "Material Weaknesses" In Its Internal Controls
  • Is Deposit Insurance a Solution or a Problem?
  • Major Rail Merger Gets Approval
  • What Does Inflation Mean to You?

Don’t Miss

Default Risk Among the Many Concerns with Annuities

Risk and Reward: An Efficient Frontier

How to be a Billionaire: Proven Strategies from the Titans of Wealth

Cryptocosm and Life After Google

Warning: Avoid Mutual Fund Year End Distributions

Is Gold a Good Long-term Investment?

How to Invest in Gold

Vanguard Wellington (VWELX): The Original Balanced Fund

What is the Best Gold ETF for Investing and Trading?

Procter & Gamble (PG) Stock: The Only True Dividend King

The Dividend King of the North

You’ll Love This if You’re Dreaming of an Active Retirement Life

The Importance of a Balanced Portfolio

Invest with Peace of Mind and Comfort

What Kind of Life Are You Investing For?

RSS The Latest at Richardcyoung.com

  • Pushing Back at ESG
  • Your Survival Guy’s BEST Insider’s Guide to Key West
  • Greetings from Key West
  • Cheap Reliable Heating – a Life Saver
  • For Whom Is Your Portfolio Serving?
  • Are You Prepared to Run Out of Water?
  • Biden Has Lost Control of the Northern Border Too
  • Is Plant-Based Meat Unhealthy and Harmful to the Environment?
  • ESG, By-Pass the Ballot Box
  • Are You Living Your Best Life?

RSS The Latest at Yoursurvivalguy.com

  • Your Survival Guy’s BEST Insider’s Guide to Key West
  • Be Wary of Those Who Wrap Themselves in Capes
  • For Whom Is Your Portfolio Serving?
  • ESG: Are Markets Ready for “A Needed Dose of Reality?”
  • Was Silicon Valley Bank a Victim of ESG?
  • Are You Living Your Best Life?
  • March RAGE Gauge: Will the Black Swan Usher in Digital Dollars?
  • Gretchen Whitmer Reviving Forced Unionization in Michigan
  • Will the Black Swan Usher in Digital Dollars?
  • How the Rich Get Richer: You Invest, They Win

About Us

  • About Young Research
  • Archives
  • Contributors

Our Partners

  • Richard C. Young & Co.
  • Richardcyoung.com

Copyright © 2023 | Terms & Conditions

 

Loading Comments...
 

    loading Cancel
    Post was not sent - check your email addresses!
    Email check failed, please try again
    Sorry, your blog cannot share posts by email.