Chart of the Day: Don't Fight the Fed

For 3+ decades, fighting the Fed has not been a money-making strategy

When the majority of global central banks are raising rates, stocks have struggled to sustain strength.

Why it matters: There have never been more ways to discuss financial market liquidity. Some of them are useful - many are not. Most are largely conjecture because the either the instruments being discussed or their application are relatively new. They haven’t gone through the wash enough times to know whether they will hold up. Interest rate policy has gone through multiple market cycles and we can see in the data a certain pattern.

Over the past 30+ years, when a majority of global central banks have been cutting rates (either actively or as their most recent action), stocks have tended to do well. The S&P 500 has risen at a double-digit clip in this environment, accumulating virtually all of the net gains for the index since 1990. When a majority of global central banks have been raising rates, stocks have struggled to hold steady. Moving to the sidelines in during global rate hike regimes saved a lot of headaches at very little cost. There is a reason that it has not paid to fight the Fed, especially when other global central banks are onboard.