“Don’t Fight the Fed”

It is right up there with “you don’t pull on Superman’s cape, you don’t spit into the wind, (and) you don’t pull the mask of the old Lone Ranger.” The Federal Reserve has enormous power over our economy and continues to support its recovery and expansion. It does it with easy money along with other special facilities for the large financial players. “You don’t fight the Fed.”

Recently, investors have freaked out over concerns that the Delta variant of the coronavirus would restrain economic recovery, if not reverse it all together. Along with rampant inflation in some sectors, investors are also concerned that profit margins may not be as good as expected. Higher costs with concerns about future demand is not a recipe for investor confidence.

However, with cheap and abundant liquidity, it is unlikely that sell-offs in the stock market will go too far. Remember, the equities started up last year based upon easy money long before there was a recovery in sight. The economy will emerge from this pandemic; it just may not be as smooth and direct as many would like. We will see about inflation, short term or not. It is far too early to tell. Bond investors certainly do not seem to be worried; rates continue to fall. With the Fed on the side of investors, you simply must stay steady my friends.

The Lonely Bull