Implications of the Fed’s Policy Shift for Investors

The Federal Reserve signaling a shift in monetary policy is causing a shift in the markets that have run hot on many years of stimulus and low rates. Now investors must shift with the Fed, identify different strategies suited for a tighter policy regime, and adjust portfolios to stay on track towards long-term goals.

What Will Be Covered

A Party for the Ages – A Recap of the Punchbowl Effect

For more than a decade, US equity investors have enjoyed a party comprised of strong overall gains and short-lived corrections that were treated as opportunities to “buy the dip” and “party on”.

The party began in 2009 after the Great Financial crisis. It was hosted by the Fed and the US Congress, who offered a highly accommodative “punchbowl” in the form of low-interest rates, stimulative monetary policy, and fiscal stimulus.

It was truly a party for the ages, lifting the S&P 500 dramatically and generating an eye-popping 740.04% cumulative return, with an average annual return of 18.04% from March 2009 through December 2021. This may be skewing investor expectations for stock market returns going forward.