The theme this week on the Retirement Quick Tips Podcast is: Don’t Fight The Fed

Today, I’m talking about how the trend of interest rates matters most…

• The direction of interest rates is generally what matters most rather than the actual current level of interest rates. According to Zweig, “the trend of interest rates is more significant than the level itself…and “Moves by the Fed toward easing have a greater positive impact on stock prices than the negative effect” [created by raising interest rates]
• Turning to today, what do we see? Fed policy that clearly points to higher rates ahead. 
• With that backdrop, it’s hard to make a case for higher stock prices in the short term.
• The good news is that (hopefully) sooner rather than later, interest rate policy will finally start beating inflation down, and at that point, the Fed can let off the gas with their interest rate increases. 
• In the meantime, I think it will be quality that matters most and will keep investors from throwing in the towel. Commenting in late October, Thomas Peterffy, the chairman and founder of Interactive Brokers Group Inc., said “People better roll up their sleeves and begin to research and try to identify companies with great business prospects and good management, ” said Peterffy. “That is not going to be so simple.” 
• If you have cash on the sidelines, now is the time to start adding cash when stocks are battered. We don’t know when the Fed will stop raising rates, but it’s likely to happen in the next year, so you want to be fully invested by the time the stock market bottoms. 
• Zweig died in 2013, but I think he would be quite pleased that his advice of don’t fight the Fed still holds true today, more than 50 years since he asserted his theory. 

That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the Retirement Quick Tips podcast.  

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