We truly are in uncharted waters. We are witnessing first hand what happens when a central bank ends Quantitative Easing. The Fed has been running QE since the ‘08 crash in multiple waves and has created an extremely friendly environment for the stock market. Their asset purchases, combined with low interest rates have created a scenario where most people don’t want to put their money in a savings account that only pays 0.05% interest, so they’ve all waded into the stock market. And the gains have been good. Remarkable even.
But the ride is ending. The Fed is doing the exact opposite of what they’ve been doing for the last decade which caused the market to boom. They are raising rates and selling their assets (instead of lowering rates and buying assets). I strongly believe this market crash will NOT be a run of the mill crash. I think this is a game changing scenario because the macro events have changed significantly.
I think it would be smart to sit on the sidelines for a while until we see inflation under control. Have some cash set aside and wait for the true market capitulation to happen later this year. I’m not buying much of anything right now. Patience is your friend. Wait until the Fed gives some positive guidance moving forward.
As they always say, don’t fight the Fed.
Leave a Reply