A significant discovery was made this week.
The Federal Reserve just grew up! The Board's 12 voting members residing on Constitutional Avenue in Washington DC became adults this week when they discovered they had caused most of the inflation in the United States.
2022 will be unlike any other year in our history of investing.
There has never been a time in modern history when we inflated ourselves out of a problem of this magnitude. Yes, we did similar things in 2008, but that was a structural problem we created. Covid was an invader the West could neither adapt to nor fathom.
Fast forward to this year, we have trillions more in debt and are still fighting the same issues of 2020. When does this stop? I advise finding things that make you happy, being as positive as humanly possible, and moving on.
For investing, our Federal Government has done a 180 on Fiscal and Monetary policy, which will affect our progress and potentially limit our areas in which to invest in the upcoming twelve months.
This year, the unmeasurable "X" factor will be more significant than usual and probably come from a disruptive Fed or Congress policy.
Fear not, investors!
Progress will continue slowly if we get consistency in macro and policy conditions. You can gauge that progress by watching the bond market. They are the kings of the economy. They dictate progress and can show you when there is a policy mistake, not to be confused by political noise.
January market update:
Currently, the policy of tapering the Federal Reserve's balance sheet quickly is not welcome in the financial markets. December Fed minutes showed that tapering and raising rates significantly faster than publicly discussed not even thirty days ago.
Despite being Fed Chair for over four years, Powell still needs a consistent narrative. (sigh!)
Just yesterday, at his confirmation meeting in Washington, Powell walked back some comment after seeing the damage they just caused.
If current monetary policy continues, this may well be the year Value triumphs over Growth, which would be astonishing. (History lesson: Value was king from 2000-2008. Growth was the Ace from 2009-2020)
Remember, bull markets die hard!
Chris
Christopher R. Lakian
Comments