This famous Wall Street slogan has become popular again in recent months as more and more investors believe in the Fed’s ability to generate economic recovery through the wonders of QE. But the facts from the last few years don’t exactly corroborate the “don’t fight the Fed theory (via David Rosenberg at Glulskin Sheff):
Since the first cut in the Fed funds rate on September 18, 2007 …
- The S&P 500 has gone from 1,520 to 1,223.
- The unemployment rate has gone from 4.7% to 9.8%.
- Industry capacity utilization rates have gone from 81.5% to below 75%.
- The 10-year note yield has gone from 4.5% to below 3%.
- Housing starts have gone from 1.183 million units to 0.519 million.
- Median real estate values have gone from $210,500 to $170,500.
- Core inflation has gone from 2.1% to 0.6%.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.