“Don’t Fight the Fed” is an old market cliché that was very applicable during the longest bull market in US history, which lasted almost 11 years following the Great Financial Crisis. The phrase embodied the sentiment that if the Fed was stimulating the economy with accommodative policies, commonly known as Quantitative Easing, it made little sense to bet against the market’s bullish trend.
The phrase “Don’t fight the Fed” has now taken on its alternate meaning. When Fed policies are implemented to slow the economy, we are clearly in a different phase of the economy than what we’ve enjoyed for the last decade or so. With the inflation fight the top priority for the Fed, we should expect declining earnings, slowed spending, higher unemployment, a bearish stock market, and many other indicators of a contracting economy.
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